US healthcare vote and CBR rate decision in focus

Forex News and Events

USD in the doldrums ahead of key vote (by Arnaud Masset)

The end of the week was particularly tense in the FX market after the much-awaited vote from the House of Representatives on the plan to repeal and replace parts of the Affordable Care Act. The US dollar has been trading in a volatile range against most of its counterparts as market participants grow impatient. It may seem surprising that the market is monitoring closely the development of this specific subject as it will not be a game changer for the US economy. In fact, it is widely seen as a test for Donald Trump and his ability to pass the promised reforms. In short, if Obamacare is not repealed, it will seriously damage the market’s confidence and would most likely trigger a sell-off in the equity market and increase selling pressure on the USD.

After sliding 0.25% during the Asian session, the single currency rapidly returned above the 1.08 threshold as European traders stepped in. The dollar index was in free fall as it tumbled 0.30% in a couple of hours to reach 99.697. EUR/USD is currently testing a key resistance area at around 1.08 (Fibo 38.2% on May 2016 - January 2017 debasement at 1.0828 and previous highs); if broken the door is wide open towards 1.10.

Russia set to hold rates unchanged at 10% (by Yann Quelenn)

The Central Bank of Russia is due to announce its key rate decision later this morning but we believe that rates will remain unchanged at 10%.

The ruble has been strengthening since the beginning of the year, providing some room for the central bank to lower rates, but we think that inflation expectations are still too high. Even though inflation is dropping at a fast pace it still lies at 4.4% y/y and should prevent the central bank from lowering rates to 9.75%.

The CBR’s cautiousness since its last meeting was mostly due to the Fed hiking rates and although dollar demand should strengthen, the ruble has been performing well. Nevertheless, weaker global oil prices are adding downside pressures on the ruble.

Finally, global uncertainties continue to linger and the central bank has already announced that it will not rush to cut rates. It is likely that policymakers are waiting for GDP to enter positive territory before making any serious moves. For the time being, we maintain our bullish stance on the ruble.

Silver - Increasing Demand.

 

The Risk Today

Yann Quelenn

EUR/USD keeps on pushing higher, even though the pair is now pausing around 1.0800. A break of the upside channel would signal persistent buying pressures. Key resistance is given at a distance 1.0874 (08/12/2017 high). Strong support can be found at 1.0493 (22/02/2017 low). The technical structure suggests deeper increase towards resistance at 1.0874. In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.

GBP/USD now lies in a short-term uptrend channel. There are rooms for further strength. Hourly resistance is located at 1.2570 (24/02/2017 high). Hourly support is given at 1.2324 (03/17/2017 low). Expected to show continued strength. The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely

USD/JPY has failed to break key resistance given at 115.62 (19/01/2016 high) confirming persistent selling pressures. The pair has broken strong support at 111.36 (28/11/2016 low). Hourly resistance can be located at 113.57 (16/03/2017 high). We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

USD/CHF is declining. Hourly support is given at 0.9862 (31/01/2017 low). Key resistance can be found at a distance at 1.0344 (15/12/2016 high). Expected to show continued weakness. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

Resistance and Support:

EURUSD	GBPUSD	USDCHF	USDJPY
1.1300	1.3445	1.0652	121.69
1.0954	1.3121	1.0344	118.66
1.0874	1.2771	1.0171	115.62
1.0800	1.2496	0.9914	111.11
1.0454	1.1986	0.9862	106.57
1.0341	1.1841	0.9550	106.04
1.0000	1.0520	0.9444	101.20