The Fed hawkishly hiked rates

Peter Iosif, ACA, MBA IronFX

The Fed shakes the markets

The Fed proceeded with its first rate hike since 2023, as was widely expected. It should be noted that the bank hiked rates against US President Trump’s wishes. It’s characteristic that Fed Chair Warsh stated that 'Inflation is too high and has been for too long’, signalling his hawkish intentions. Overall Fed Chair Warsh seems to be ready to differentiate the bank’s monetary policy from Trump’s wishes. The bank’s new dot plot indicated that Fed policymakers currently expect another rate hike until the end of the year. The decision renewed support for the USD in the FX market, also weighing on US equities and gold’s price.

BoE expected to remain on hold

In today’s late European session, we highlight the release of UK’s BoE interest rate decision. The bank is expected to remain on hold yet the acceleration of inflationary pressures in the UK economy, dictates the necessity of a more hawkish stance by BoE. Should the bank remain on hold and sound hawkish in its forward guidance, we may see the pound getting some support today.

BoJ to hike rates

BoJ is expected to hike rates today by 25 basis points. The bank is under pressure given the high oil prices but also the weakening of JPY and US Treasury Secretary Bessent’s hawkish eye. On the flip side, growth seems fragile and the Japanese Government favours low rates. A substantially hawkish rate hike could provide support for JPY, while anything less could weigh on the Yen.

Oil prices correct lower

Reports that Saudi Arabia is to offer additional oil to Asian refiners via Oman, tended to ease the markets for the supply side of the international oil market. Yet the situation in the area remains substantially fragile and any escalation of tensions in the area, could push oil prices once again, while further easing of the markets worries for oil supply, could weigh on oil prices.

Other highlights for today

Today we get the Eurozone’s final HICP rates for August, Canada’s Business barometer for September, the US building stats for August, the US weekly initial jobless claim figure, the US Philly Fed Business index for September and Canada’s producer prices for August. In tomorrow’s Asian session, we Japan’s CPI rates for August and New Zealand’s trade data for the same month

Charts to keep an eye out

USD/JPY rose yesterday, breaking the 157.50 (S1) resistance line now turned to support. Yet the RSI indicator remains low, implying that there is still a bearish predisposition of the market for the pair’s outlook. We highlight as the next big test for USD/JPY the release of BoJ’s interest rate decision in tomorrow’s Asian session. Should the bears regain control over the pair, we may see USD/JPY breaking the 155.00 (S1) support line and start aiming for the 152.10 (S2) support level. Should the bulls be in charge over the pair, we may see USD/JPY breaking the 157.50 (R1) resistance line and start aiming for the 160.50 (R2) resistance level.

WTI edged lower yesterday and during today’s Asian session, after failing to break the 101.00 (R1) resistance line. In its drop WTI’s price action has breached the upward trendline guiding it, while the RSI indicator edged lower, signalling an easing of the bullish market sentiment for the commodity’s price. Hence, we currently switch our bullish bias in favour of a possible stabilisation of the commodity’s price action. Should the bears take over, we may see WTI’s price dropping below the 94.30 (S1) support line, aiming for the 87.55 (S2) support barrier. For a bullish outlook, we would require WTI’s price to break the 101.00 (R1) resistance line clearly and start aiming for the 108.85 (R2) resistance level.

Calendar follows

USD/JPY daily chart

Support: 155.00 (S1), 152.10 (S2), 149.40 (S3).

Resistance: 157.50 (R1), 160.50 (R2), 162.80 (R3).

WTI daily chart

Support: 94.30 (S1), 87.55 (S2), 82.00 (S3).
Resistance: 101.00 (R1), 108.85 (R2), 114.00 (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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