Market Analysis: 18 October 2016
by Christala Parmaxi:
Reserve Bank of Australia
During the early Asian session RBA’s latest policy meeting minutes were published while some hours before the new RBA Governor Philip Lowe delivered his first speech. The Governor said that the expectations for maintaining growth, job creation and inflation are reasonable as the headwinds started to ease. During the last policy meeting the bank left interest rates unchanged at 1.5% and the minutes revealed that the economic expansion is expected to continue at a moderate pace and developments globally have been slightly more positive. The minutes release pushed Australian Dollar higher from 0.764 to 0.7665 and the pair is still rising today during the European session.
Fed Vice Chair Speech
The Federal Reserve Vice Chair Stanley Fisher did not encourage investors to expect a rate hike soon on his speech yesterday but in contrast he supported Yellen’s dovish speech. The Vice Chairman stated that he see limits and obstacles to an efficient plan from the Fed to push unemployment even lower. Fisher said that historical attempts of Central Banks to reduce unemployment below the lowest sustainable level were not successful at most of the cases and they have resulted in subsequent inflation. Moreover, Stanley Fisher said that the unemployment rate is currently too close to full employment and the 2% inflation target of the Fed shall not be changed as this would undermine the whole framework. The US Dollar traded lower against all of its major counterparties yesterday and it keeps on losing its power today, indicating a possible end of a strong period.
Today we are awaiting US September Core CPI, which is expected 10 points lower than August at 0.2%, an additional supporting clue on US Dollar’s weakness. During tomorrow’s Asian session the Chinese Gross Domestic Product and Industrial Production are going to be released; both of those indicators are expected to be stable at 6.7% and 6.4% respectively.
The Cable found support on 1.21 and since then it is moving higher, touching the level of 1.2275 today. The Average Directional Index has turned into positive territories while RSI and MACD are sloping upwards. The valid resistance levels are near 1.232 and 1.2465.
Shifting on the hourly chart, the price crossed to the upside SMA50 and SMA100 and it is trying to reach SMA200 at the resistance of 1.232. The indicators are on bullish territories and are slopping upwards while ADX indicates positive directional movement. We are bullish on
Cable today targeting the resistance of 1.232.
Aussie expanded its gains today after the release of RBA meeting minutes during the early Asian session. The pair is currently walking on Bollinger’s upper band while there is room for it to move up to the psychological resistance of 0.77. The risks are near the critical support of 0.76.
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