The U.S. indices closed lower on Tuesday ahead of the Federal Reserve's interest rates decision Wednesday. The Dow Jones Industrial Average dropped 19 points (-0.1%) to 27,071, the S&P 500 slipped 2 points (-0.1%) to 3,036, and the Nasdaq Composite slid 49 points (-0.6%) to 8,276.
Regarding the U.S. economic data, the Conference Broad Consumer Confidence Index fell to 125.9 in October (128.0 estimated) from 126.3 in September. Later today, the Fed is assumed to cut its benchmark rate by 25 basis points to a target range of 1.50%-1.75%. Also, the U.S. third-quarter GDP is estimated to grow at an annualized rate of 1.6% on quarter, and the ADP private jobs are expected to increase 110,000 in October.
European stocks were diverse, with the Stoxx Europe 600 sinking 0.2%, Germany's DAX was little changed, France's CAC was up 0.2% while the U.K.'s FTSE 100 dipped 0.3%.
USD/JPY - Bullish Trendline Supports
The USD/JPY closed at 108.881 after placing a high of 109.068 and a low of 108.749. The overall movement of the pair remained Bearish that day.
At 4:30 GMT, the Tokyo Core CPI was released, which was expected to be 0.7%, but it came in as 0.5% and weighed on Japanese Yen. The less than expected Inflation from Japan gave strength to USD/JPY in the early trade session on Tuesday.
However, after the macroeconomic release from the American side, USD/JPY started to fall amid Weak US Dollar. The S&P Composite HPI at 18:00 GMT came 2.0% against the expectations of 2.1% and weighed on the US dollars. USD was further weighed by the release of Consumer Confidence as 125.9 against the expectations of 128.2. However, the pending home sales supported USD a little after coming in as 1.5%.
The weaker than expected consumer confidence caused a sharp decline in the prices of USD/JPY on Tuesday.
Other than economic data, the pair remained under pressure ahead FOMC meeting on Wednesday. The decision about the 3rd rate cut by Federal Reserve this year will be announced at the FOMC meeting on Wednesday. Traders are betting on uncertainty raised after the positive optimism from Partial Trade Deal between US & China and Brexit Extension from Europe to the UK. These factors have dropped the chances for further rate cuts in the market. So, USD/JPUY was under pressure on Tuesday ahead FOMC to collect gains on Wednesday from bets.
USD/JPY- Daily Technical Levels
|
Support |
Pivot Point |
Resistance |
|
108.53 |
108.65 |
108.79 |
|
108.39 |
108.92 |
|
|
108.13 |
109.18 |
USD/JPY- Daily Trade Sentiment
The USD/JPY has come out of the sideways range of 108.750 - 108.300, and it placed a high around 109.10 area before it slipped to trade at 108.850. At the moment, the USD/JPY is trading outside of an ascending triangle pattern, which was keeping USD/JPY bullish. The USD/JPY may find the next support at 108.700 area, whereas the resistance stays at 109.100.
The MACD and RSI are suggesting neutral bias, but the 108.700 level may trigger a bullish trend in the USD/JPY.
USD/CAD- 50 EMA Supports
The USD/CAD closed at 1.30545 after placing a high of 1.30784 and low of 1.30492. The overall movement for the pair remained Bearish that day. The lack of macroeconomic data from Canada moves USD/CAD dependant on US Dollar and Crude Oil prices on Monday.
Despite the robust macroeconomic data from the United States and the drop of Crude Oil prices on Monday, USD/CAD managed to close its market with a Bearish Candle.
Pair moved in an upward direction to place a high of 1.30784 on Monday after the release of Strong US macroeconomic data related to its International Goods Balance. But the pair started to drop afterward because of the possibility of the US Federal Reserve to cut its rates for the third time this week.
The Canadian and the United States central Banks will announce their policy decisions on 30th October this week. The traders are betting that US Fed would cut its rate for 3rd time this year, and the Canadian Central Bank would keep its rates the same. Canadian Bank has not cut its rates since 2015, and there is no probability for cuts this week, but the US Central Bank is expected to reduce its rate by 25 basis points.
Yields of Country are affected by rate cuts, and the possibility of a rate cut by Fed on Wednesday has made the possibility of lower US Yields in the coming days and made the Canadian Dollar more attractive.
The 2-Year yield of Canada has surpassed the US counterpart Yields this month for the first time in 2 years, and traders are betting that there are more chances for further increase. The gap between US & Canadian 10-Year Yields has been narrowed down to 25 basis points this month from 89 basis points in March.
Canadian Dollar gained almost 4.3% against the US Dollar this year and is continuously performing well in G-10 Currencies. If the US Federal Reserve, make the 3rd Cut in its rates this year, then Canadian Dollar would become the highest Yielding G-10 Currency.
USD/CAD- Daily Technical Levels
|
Support |
Pivot Point |
Resistance |
|
1.3053 |
1.3077 |
1.3111 |
|
1.3018 |
1.3135 |
|
|
1.296 |
1.3193 |
USD/CAD - Daily Trade Sentiment
The USD/CAD trades at 1.3080 level, just above the 50 periods EMA which is supporting the commodity currency on the 2-hour chart. The MACD is still bullish, carrying value above 0 and a robust green histogram, which is supporting the bullish sentiment.
Besides, the USD/CAD has completed the 38.2% Fibonacci retracement at 1.3075, and above this, the USD/CAD has the potential to go after 1.3110. A bearish breakout can lead USD/CAD towards 1.3060.
AUD/USD – 38.2% Fibonacci Retracement In-Play
The AUD/USD closed at 0.68376 after placing a high of 0.68452 and a low of 0.68105. The overall movement for the pair remained Bullish that day.
Ahead of crucial economic data and FOMC Meeting this week, AUD/USD gained traction at the starting day of the week. The lack of macroeconomic data from Australia made the pair movement to follow US Dollar on Monday.
Market Risk improved after the dose of Trade Optimism from President Trump's Comment. He said that he was expecting to sign a portion of Phase one deal between US-China before the APEC Summit in Chile. The Chinese media also supported the comment and said that both sides are looking into each other's keen interests.
Australia being the largest trade partner of China, is more sensitive towards China-US Trade talks. Aussie gained traction after the increased possibility of an end to the US-China trade war due to the positive progress of the Phase-one deal.
The risk appetite increased in the market and raised AUD/USD prices further to make a Bullish candle at the starting day of the week. On Tuesday, the Governor of Reserve Bank of Australia will be giving its speech, which would cause fluctuation in AUD/USD prices.
AUD/USD - Technical Levels
|
Support |
Pivot Point |
Resistance |
|
0.684 |
0.6849 |
0.6862 |
|
0.6828 |
0.687 |
|
|
0.6806 |
0.6892 |
AUD/USD - Daily Trade Sentiment
The AUD/USD trades at 0.6880 level, which also marks a double top resistance level. Closings of candle below this level suggest chances of a bearish bias. On the lower side, the AUD/USD may find support at 0.6840 and 0.6825. The 50 periods EMA stays at 0.6830, and closing of this level can drive further selling until 0.6810.
The Fed rate cut will heavily impact the AUD/USD. Therefore we should wait for the actual decision instead of opening directionless trades.
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