Daily Market Analysis: 14 December 2016

USD Daily Change

by Christala Parmaxi, CFTe

Overview

FOMC Policy Meeting

The most important day of December is here! The FOMC rate decision and the policy meeting will be held tonight at 19:00 GMT and 19:30 GMT respectively. The Dollar is preparing for this announcement and the Fed’s plans for 2017 since for the last 2 days it is correcting against most of the majors. Yesterday, it closed the day lower than the New Zealand Dollar and the Japanese Yen while it remained almost unchanged against the rest of them with minimal fluctuations within the day. Investors are clearly waiting for the Fed and they avoid much trading on the days before. It is not that the market participants do not expect the Fed to raise rates by 25 points, from 0.5% to 0.75%, after all there is a 100% probability of the Fed hiking today and this info is already priced in the markets. However, what will matter today is the FOMC statement and the Press Conference after the decision. Since this rate decision is already priced in the markets, except if any unlike surprises of no hike or hike by 50 points arise, we are all interested to hear the Fed’s plans for 2017 and whether they see rate hikes in the first half of the year and how many hikes they see in general in 2017.

The last time the Fed raised the rates was in December 2015, despite the forecast of 2 rate hikes in 2016 none has been done so far. The hike the last year boosted the US Dollar to soar and end a profitable year against most of the G7. If Yellen is hawkish we would expect the Dollar to surge, especially against the Japanese Yen and the Euro which have suffered significant losses after the election of Donald Trump.

USD Daily Change

EURUSD

The pair is trending between 1.06 and 1.067 and it is expected to keep on trading within this level until the Fed decision tonight. The direction of it will clearly be determined by the FOMC statement and press conference later today. A positive outcome for the US Dollar would push the EURUSD to test again the record low level of 1.05 while a negative outcome of it would boost the pair to test the psychological resistance of 1.08. If Yellen avoids to comment further then the Euro is expected to follow the current trend and move normally up to SMA200 and upon penetration of it to rise up to the resistance of 1.07. Until Fed, we can trade the move between the rectangle of Bollinger’s lower band and SMA200.

 

 EURUSD

EURUSD

GBPUSD

The Pound tested the resistance of 1.273 but was not able to break it and it moved again back to SMA200 which is a strong support for the pair. Upon penetration of SMA200 we see the pair lower at 1.26 while if the support persists we see it again testing the resistance of 1.273. ADX indicates positive direction while MACD and RSI are on neutral levels. We see the pair ranging between the two bands of SMA200 and 1.273 until the Fed and if the Fed is neutral then we would expect the pair to range in between those two bands until tomorrow’s policy meeting of the BoE.

GBPUSD

GBPUSD

 

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