The events on the oil market caught the attention of investors at the beginning of the week, but one should not forget about further important events ahead of us, including the Fed's decision on interest rates. In addition to oil, it is also worth paying attention to the currency market, where the situation on the dollar, euro and Australian dollar looks very interesting.
We will move on to the broader discussion of the possible actions of the US Federal Reserve and market expectations in tomorrow's comment, however, today we signal that the two-day meeting of the Federal Open Market Committee is just beginning. Data from the US economy, which were published in the first half of September, suggest that in retail sales or inflation we are still not disappointed. Only the manufacturing sector appears to be in poor condition, and the US economy is showing no signs of slowing down. Hence, even the interest rate market, which estimated five interest rate cuts by 2020 at the beginning of September, has now reduced its expectations to less than four cuts. Lowering expectations regarding interest rate cuts in the US, as well as rising tension in the Middle East, seems to be a factor supporting USD at this time.
After the decision of the European Central Bank last week, which did what it could to save the European economy, the EUR/USD rate rose above 1.1100. There was also technical resistance set by a trend line drawn through the recent tops.
EUR/USD daily chart. Source: Conotoxia trading platform
However, the double bottom formation and the outside bar formation remain valid. Hence, the Fed's decision may be crucial for determining the further trend of EUR/USD. On the one hand, strong support, and on the other, key resistance. Perhaps after the Fed's decision we may see an attempt to break one or the other, so that then a larger trend can develop.
Australian dollar is also one of the most interesting currencies. The AUD/USD exchange rate in the last two weeks has risen sharply after previous strong declines. Nevertheless, worse data on industrial production from China, which is Australia's key trading partner and dovish rhetoric of the central bank, make the sustainability of AUD rebound questionable. The interest rate market estimates that the RBA will cut the main interest rate from 1 percent to 0.75 percent within three months.
Therefore, in addition to the oil market, the beginning of the week also brings interesting events on the currency market that are only just gaining momentum.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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