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Wednesday, March 21st
The EUR/USD pair corrects higher this Wednesday after yesterday’s drawdown, triggered by bullish tone of the US dollar and disappointing German Zew surveys. Today it is all about the Fed meeting. It is widely expected that the Fed will increase its interest rate by 0.25%, so investors are more interested in comments of the head of the regulator. The market could witness notable volatility if Mr.Powell revises rate dot plot to four for 2018. Also, markets will await for any changes in long-term forecast of the Bank and clarity regarding impact of trade war on the US economy. Besides the Fed interest decision, the US will also publish today the data from the housing market, however, it is expected that markets won’t pay any attention to it.
The GBP/USD pair recovered some ground this Wednesday, keeping its positions above the level of 1.4000. Yesterday the pair received notable bearish impetus on the back of weaker-than-expected UK CPI data, while easing part of its gains, backed by Brexit negotiation progress. However, now all attention turns towards the Fed and BoE interest rates decisions. According to market expectations, the Fed will increase its interest rate today, so investors are awaiting for detailed information regarding Fed further rate strategy, which will be able to shake up the market. On the other hand, despite weak UK inflation data, the BoE is still expected keep its intention to lift the rate in May, as latest economic data of the UK showed positive results and the UK/EU have finally made a progress on Brexit terms. Today investors will look forward for data from the UK labor and the US housing markets, however, the key event of this Wednesday will be the Fed meeting.
The NZD/USD pair has stalled its downside rally, having faced resistance near the level of 0.7170, which is the lowest level since mid-October, as the market is turning cautious ahead the Fed and RBNZ meetings. In general, markets remain confident that the Fed will increase its interest rate by 25 bps, while awaiting for any clarity on Fed plans regarding rate hikes this year. On the other hand, the RBNZ will likely keep status quo, while any comments regarding further economic projections will be able to bring some additional impetus later ahead. Besides interest rates decisions, investors will also pay attention to data from the US housing market, however, reaction on the US data will likely be limited.
The USD/CAD pair came under strong bearish pressure during quiet Asian trades, having dropped more than 60 pips and refreshed its weekly lows at 1.3011 spot. The drawdown of the pair is mainly attributed to developments in NAFTA talks. According to latest news, the US decided to withdraw their auto-content proposal that all vehicles made in Canada and Mexico for export to the US should contain at least 50% of details produced in the US. The removal of the key issue could lead to a reconsideration of North American Free Trade Agreement. Adding to this, positive tone around oil prices also provides support to the commodity-linked Loonie in the middle of this week, thus additionally weighing the pair. Looking ahead, today all investors’ attention will remain glued to the Fed interest rate decision, which is scheduled for the second half of the NA session, but until then NAFTA news will continue to drive the pair.
Major events of the day:
UK Average Earnings Index +Bonus – 12.30 (GMT +3)
UK Claimant Count Change – 12.30 (GMT +3)
US Existing Home Sales – 17.00 (GMT +3)
US Crude Oil Inventories – 17.30 (GMT +3)
Fed Interest Rate Decision – 21.00 (GMT +3)
RBNZ Interest Rate Decision – 23.00 (GMT +3)
Support and resistance levels for the major currency pairs:
EURUSD S. 1.2163 R. 1.2393
USDJPY S. 105.67 R. 107.03
GBPUSD S. 1.3931 R. 1.4099
USDCHF S. 0.9476 R. 0.9612
AUDUSD S. 0.7651 R. 0.7735
NZDUSD S. 0.7130 R. 0.7274
USDCAD S. 1.3024 R. 1.3126
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