USD Mixed Ahead of FOMC; Cable: First Target Locked at 1.5300, Bulls Eye 1.5360!
The euro was traded mixed on Wednesday and early Thursday in the absence of significant economic news ahead of the ECB Monetary Policy Meeting Accounts. The greenback was also mixed ahead of the FOMC minutes later in the day! The minutes are expected to provide more clarity why Fed decided to delay an initial rate hike in September and make known the Fed future plans. However, keep in mind, that the last soft Non-Farm Payrolls report may have changed the initial Fed policymakers thoughts.
EUR/USD Technical Outlook
Nothing changed to the EUR/USD pair as it remained trapped in a tight range, roughly around the 1.1260 area. The 50-SMA and the 200-SMA are standing neutral in both the 1-hour and 4-hour charts. Despite the pair continuing to grind lower, the lack of a break of the 1.1200 level suggests the market remains bullish in the short-term and is just waiting for a catalyst, being either the FOMC later in the day or the IMF meeting due tomorrow morning.
The pound jumped on the strong Industrial Growth!
The sterling jumped against all the other G10 currencies on Wednesday following the better than expected industrial and manufacturing growth in August. Industrial production grew by 1.0%, month over month, the steepest pace since February 2014 while the Manufacturing rose by 0.5% beating expectations to have risen by 0.3% from -0.8% before. The NIESR GDP indicated a steady growth of 0.5% the three months to September as the previous figure indicating the economic growth for the three months to August.
The British spotlight of the day is the Bank of England Policy Meeting. It widely expected the Monetary Policy Committee will vote to leave the policy unchanged. It's notable that the BoE minutes of the meeting are released along with the decision announcement, thus, the general tone of the committee will have a considerable impact of the currency.
Following this yesterday’s report “USD Plunges as IMF has downgraded Global and U.S. Economic Growth Forecast” which we said that we were expecting the GBP/USD to reach 1.5300, the cable gained momentum, rose more than 0.5% and surged above the 1.5300 barrier, currently trading at 1.5315 ahead of the BoE meeting. Going forward, as we stated in the yesterday’s report I would expect the pair to reach 1.5360, therefore I remain strong bullish on this pair. However, in order to confirm this I will need to see a break of the 4-hour 200-SMA, which currently lies around 1.5340.
USD/JPY – Technical Outlook
The USD/JPY pair remains trapped within a very tight range since the mid-August and it is currently challenging the 50-SMA and the 200-SMA on the 4-hour graph. A break below the 118.50 with a daily closing will change the short-term outlook; whilst coming back above 121.75 will bring the bullish picture back into focus.
Gold – Technical Outlook
The precious metal managed to cover much of the early gains and now again negotiating below the 1-hour 50-SMA. The morning decline is particularly strong and this creates the conditions for a further drop when approached some significant support levels. The level of $1,135 is key to understanding whether we are watching for a continuation of the triangle formation, which started back in early-August. Otherwise, a break above the strong resistance level of $1,150 will change the outlook to bullish, prompting a more aggressive move towards the 200-SMA on the daily chart, around $1,165.
U.S. Indices widely higher
All of the three most popular U.S. indices closed Wednesday’s trading session higher after strong gains of the stocks in the energy sector. Dow Jones increased by +122.10 points, +0.73% with pharmaceutical company Merck & Co Inc. (NYSE: MRK) gained more than 2% and Exxon Mobil Corporation (NYSE: XOM) amid the top gainer stocks with almost +1.7% up. Nasdaq picked up by +0.90% while S&P 500 edged higher by +0.80%.
Economic Indicators
Thursday encloses important economic news! In the morning, market’s attention will turn in UK where the Bank of England Monetary Policy Committee will vote for its interest rate. The market expects one member of the committee to vote for an interest rate hike while the other eight are expected to vote for leaving interest rates unchanged. The BoE minutes and the monetary policy statement will be eyed to details to decipher probable hawkish comments.
The European Central Bank will publish its Monetary Policy meeting accounts. Going forward, in US, the FOMC minutes will be scrutinized by traders for explanations what kept back the Fed policy members to vote for an interest rate hike in September’s policy meeting. However, after the latest NFP report vital data changed that cancel out earlier hawkish thoughts of the policymakers for a rate hike in the upcoming policy meeting or later in 2015.
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