PRICES ARE CONSOLIDATING AHEAD OF THE FOMC DECISION
Markets show a consolidation before the release of the Fed’s statement on monetary policy tomorrow. Traders are reluctant to build up positions and are getting ready for big moves. The vast majority are sure about the rate hike of 0.25% in the US taking interest rates to 1.00-1.25%, but the trigger for sharp impulses in either direction may become the rhetoric of the Fed’s chairwoman Janet Yellen. Hints about dovish views concerning the fate of the third rate increase during 2017 may lead to the fall of USD and will support the price of gold. On the other side, mentioning about possible balance sheet cuts till the end of the year may lead to a confident appreciation of greenback.
Slight support for the EUR/USD today came from the report on economic sentiment in the Eurozone from ZEW that showed growth in June to 37.7, which is 0.5 more than the expected figure. At the same time, GBP/USD demonstrated strong growth that may be partially explained by the rise of consumer inflation in May to 2.9% against forecasted 2.7%. The rise of inflation may lead to tightening of the monetary policy of the Bank of England.
Quotes of AUD/USD and NZD/USD will depend on Chinese industrial production reports for April at 02:00 GMT tonight, as China is the key trade partner for Australia and New Zealand. The kiwi may see some action following the release of the current account balance for New Zealand that will be published at 22:45 GMT.
The EUR/USD price can’t gain a foothold beyond the limits of the local downward channel. Currently, quotes keep consolidating above the important mark of 1.1200. The stimulus for the resumption of upward movement may come from breaking through the 1.1230 level, which coincides with the local maximum. In this case, the next targets will be 1.1280 and 1.1400. We also do not eliminate the possibility of the resumption of a decline within the current channel and in the case of opening short positions with potential targets at 1.1160 and 1.1100, the stop may be set above the resistance at 1.1230.
On the 15-minute chart, the GBP/USD has formed a reversal pattern – “double bottom” after which usually we usually see a strong upward impulse. The closest target within the upward movement will be 1.2780 and its overcoming will open the way for continued growth up to 1.2860 and 1.2890. We should mention that positions of bulls are weak and a decline of the MACD signal line indicated the possibility of a downward correction of the GDP/USD. Support for this idea may be political instability after the recent parliamentary elections.
The AUD/USD quotes tested the resistance at 0.7565 but retreated downwards. As a result, price approached the lower limit of the range 0.7520-0.7565 and its breaking may lead to a continued decline with potential targets at 0.7500, 0.7450 and 0.7420. The RSI on the 15-minute chart is close to the oversold zone that points to the possibility of fixing positions which in turn will push the price back to 0.7565 or even higher to 0.7600.
Consolidation of NZD/USD under the resistance level of 0.7220 is explained by anticipation of the release of data on the current account balance in New Zealand at 22:45 GMT and tomorrow’s data from China on its industrial production at 02:00 GMT. Despite the possibility of sharp moves tonight, their potential will be restrained by the anticipated Fed statement on monetary policy tomorrow night. Overcoming 0.7220 may result in continued growth up to 0.7300, 0.7375 and 0.7415, but on the other side, breaking through the lower boundary of the ascending channel and the support at 0.7120 may become the trigger of the trend change to negative with the first targets at 0.7150 and 0.7050.
Gold’s price keeps moving within the descending corridor in anticipation of tomorrow’s FOMC decision on interest rates in the US. The predicted rate hike can have unexpected effects on bullion quotations. On one hand, gold is getting less attractive compared to assets that provide interest after the rate increases, but on the other hand, the main influence on the mood of traders will come from hints about the Fed’s future plans concerning future rate hikes. The indicator of the trend change from negative to positive will be breaking through the resistance at 1270. The immediate targets, in this case, are expected to be 1280, 1287 and 1295. Overcoming the support at 1260 may stimulate the bears to pull the price down to 1254 and 1244.
The American benchmark of crude oil – WTI, could not gain a foothold above the 46.00 level and left the descending channel. As a result of the fall, quotes returned below 46.00 and in the nearest future may test the support at 45.20. In the case of its breaking, the pace of decline may accelerate with potential targets at 44.25 and 43.00. For growth resumption, quotes need to rise above 47.00. Volatility is expected tomorrow after the release of crude oil inventories data in the US. Last time the growth of oil reserves in America triggered a massive selloff.