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The Euro has seen some downward pressure as the U.S. Greenback continues to gain traction ahead of the key Fed interest rate decision. Volatility should be limited before the Wednesday American trading session for the foreign exchange market. U.S. 10-year treasury yield has blown past the 3.5% threshold as market participants now fully anticipate at least a 75 basis point interest rate hike by the Fed. The German Producer Price Index rose to 45.8%, compared to 37.2% in August. EU inflation has continued to rise further despite the ECB’s move to leave negative interest rate territory. The economic slowdown and soaring energy prices will continue to plague the European economy and ECB’s ability to implement effective interest rate interventions.
On the technical side, EURUSD has successfully defended our previous estimated support level of 0.9969. Should the Fed surprise markets with a more-than-expected interest rate hike, EURUSD could spike down toward our estimated support level of 0.9902. RSI for the pair sits at 43.81, as of writing. On the four-hour chart, EURUSD currently trades below its 50, 100, and 200-day SMA.
Resistance: 1.0011, 1.0055
Support: 0.9969, 0.9902
Cable has entered a consolidation phase around the 1.13 price region ahead of the Fed and BoE interest rate decisions. Short-term interest rates on U.S. government treasuries have risen significantly as markets are now completely pricing in a 75 basis point interest rate hike by the Fed. The rhetoric around a super-sized interest rate hike by the Fed has subsided as economic data from the previous releases have shown signs of economic slowdown in the U.S. The BoE is expected to raise interest rates by a further 50 basis points, but agreement on the magnitude and frequency of interest rate hikes still remains a debate among members of the BoE.
On the technical side, GBPUSD has touched our previous estimated support level of 1.1463. In the case of a super-sized interest rate hike by the Fed, Cable could break below historical lows of 1.07225. RSI for the pair sits at 31.42, as of writing. On the four-hour chart, GBPUSD currently trades below its 50, 100, and 200-day SMA.
Resistance: 1.1561, 1.1854
Support: 1.1463, 1.07225
Gold has continued to trend lower against the U.S. Greenback ahead of the Fed interest rate decision. While the U.S. 10-year treasury yield soars past 3.5%, the non-yielding yellow metal continues to lose appeal to market participants. While, traditionally, Gold has been a tool to hedge against inflation, the pace of monetary tightening from global central banks has outpaced any hedging capabilities of the yellow metal. A surprise 100 basis point interest rate hike by the Fed could send Gold further into correction territory. The $1,600 per ounce price level will be key for Gold in the coming weeks as it marks the level just prior to the astronomic rise of Gold in 2020.
On the technical side, XAUUSD has consolidated around our previously estimated support level of $1,660 per ounce. The second level of support is established around the $1,600 per ounce level. RSI for the yellow metal sits at 37.33, as of writing. On the four-hour chart, XAUUSD currently trades below its 50,
100, and 200-day SMA.
Resistance: 1740, 1800
Support: 1660, 1600
