The Euro sank 1.33% against the U.S. Greenback as the Fed announced its highly anticipated interest rate decision. The Fed has announced a 75 basis point increase on its benchmark interest rate, the fourth interest rate hike for the year. The magnitude of the rate hike came in alignment with market expectations; however, Fed Chair Jerome Powell’s speech has once again conveyed the central bank’s determination to bring inflation down by all means necessary. The Fed has also raised its terminal rate projection to 4.25% ~ 4.5%. Dissecting Fed Chair Jerome Powell’s speech, markets should expect at least one more 75 basis point rate hike before the end of the year.
On the technical side, EURUSD has broken below our previously estimated support level of 0.9902 and is heading towards the next level of support at around the 0.98 price region. Parity has now become the short-term resistance for EURUSD. RSI for the pair sits at 35.73, 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: 0.9902, 0.98
Cable witnessed a 1% drop over the course of yesterday’s trading. The 75 basis point interest rate hike induced a surge in demand for the U.S. Greenback. The Dollar index rose more than 1% and broke above 112 at one point. The Fed raising terminal interest rate projections has further pushed implied yields upward. However, the BoE is scheduled to release its interest rate decision during today’s European trading session. A 50 basis point interest rate hike is expected from the BoE, however, policymakers could be torn between dismal economic projections and price pressure from the energy sector. Hiking rates is certainly more difficult for the BoE, relative to the Fed, as recent economic data releases from the U.K. has not supported the rhetoric for a hawkish BoE.
On the technical side, GBPUSD has broken below our previously estimated support level of 1.1463 amid an extremely strong Dollar. Our estimated secondary level of support for Cable sits at 1.12. RSI for the pair sits at 31.79, 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, 1.12
Gold rose against the Dollar over the course of yesterday’s trading. A number of factors allowed the non-yielding metal to rise against the surging Dollar. First, Russian president Vladimir Putin’s announcement for partial mobilization of the Russian military force has sparked a flight to gold as market participants fear a worsening of the Russian-Ukraine War. Second, Fed Chair Jerome Powell’s speech after the interest rate announcement seems to indicate that the central bank is no longer aiming for a “soft landing” and a recession could provoke demand for the precious metal. However, market participants should note that the Fed has upwardly revised its year-end terminal interest rate target and its long-term inflation target, thus Gold, the non-yielding asset, could still fare worse against the Dollar over a longer horizon.
On the technical side, XAUUSD successfully defended our previously estimated support level of $1,660 per ounce. Secondary support for the yellow metal rests at the $1,600 per ounce price level. RSI for the pair sits at 37.74, 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