Fed’s interest rate decision to move the markets

Peter Iosif, ACA, MBA IronFX

Fed’s expected to remain hawkishly on hold

Market attention today is expected to be on the Fed’s interest rate decision. The bank is widely expected to keep rates unchanged, while Fed Fund Futures imply a market expectations for the Fed to hike rates in the December meeting. Given also the inflationary pressures in the US economy, we expect the bank to remain hawkishly on hold. Such a decision could verify the market’s expectations for the Fed to hike rates in the December meeting thus providing support for the USD and weighing on US equities and gold’s price. Should the bank fail to sound hawkish enough, we may see the markets be taken by surprise, moderating their expectations for a rate hike to come and thus weigh on the USD and lift US equities and gold’s price.

BoC expected to hike rates

Before the Fed’s interest rate decision, we get from Canada, BoC’s interest rate decision. The bank is expected to hike rates by 25 basis points, yet the market expects it to remain on hold afterwards. We expect the bank to raise rates given the inflationary pressures especially on energy products, yet the bank may also prefer to keep its options open about the way ahead. Such a stance could weigh on the Loonie, turning the rate hike to a dovish hike, while a more hawkish approach may lift the CAD.

UK’s Autumn statement could affect the Pound

The GBP seems to be losing ground against the USD and pound traders are expected to focus on UK Chancellor of the Ex Chequers Healey’s Autumn Statement at the UK Parliament. Despite market expectations for taxes being announced that could weigh on the GBP, we also note the UK Government’s pledge to provide some “breathing space” which may support the pound.

US tech sector focuses on earnings reports

For the US tech sector, we highlight today the release of the earnings reports of Alphabet (#GOOG) and Microsoft (#MSFT). Should the actual EPS and revenue figures be higher than expected and accompanied by a robust forward guidance we may see their share prices and the market sentiment in general getting a boost. Yet note that market worries for the expenditure required for AI development tend to weigh.

Other highlights for today

Today we get the US weekly EIA crude oil inventories figure. Tomorrow, we get from New Zealand the ANZ Business outlook for October, Sweden’s preliminary GDP rates for Q3, and Eurozone’s business conditions for October.

Charts to keep an eye out

USD/CAD bounced on the 1.3990 (S1) support line, last Friday, interrupting its downward motion. Given that the downward trendline has been broken we switch our bearish outlook in favour of a sideways motion of the pair. Also the rise of the RSI indicator has risen nearing 50, implying an easing of the bearish market sentiment for the pair. Should the bulls take the lead, USD/CAD may aim if not breach the 1.4125 (R1) resistance line. Should the bears regain control over USD/CAD could break the 1.3990 (S1) support line and start aiming for the 1.3880 (S2) support level.

Nasdaq rose teasing the 29735 (S1) resistance line, now temporarily turned to support. Given that the downward trendline was broken yesterday we switch our bearish outlook to a sideways motion bias of the index. The RSI indicator has risen nearing 50, signalling the evaporation of the bearish market sentiment for the pair. Should the bulls remain in charge, we may see Nasdaq’s price action aiming for the 30770 (R1) resistance line. Should the bears be in the driver’s seat, we may see Nasdaq dropping below the 29735 (S1) support line and start actively aiming if not breaching the 28750 (S2) support base.

Calendar follows

USD/CAD daily chart

Support: 1.3990 (S1), 1.3880 (S2), 1.3730 (S3).
Resistance: 1.4125 (R1), 1.4245 (R2), 1.4410 (R3).

US 100 Cash daily chart

Support: 29735 (S1), 28750 (S2), 27050 (S3)
Resistance: 30770 (R1), 32500 (R2), 34000 (R3).

Author

Peter Iosif, ACA, MBA

IronFX

Mr. Iosif joined IronFX in 2017 as part of the sales force. His high level of competence and expertise enabled him to climb up the company ladder quickly and move to the IronFX Strategy team as a Research Analyst. Mr.

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