FUNDAMENTAL OUTLOOK

The US Fed lowered its key interest rate by 25 basis points to between 1.75% and 2% on Wednesday for the second time this year and since 2008, largely in response to worries stemming from a global growth slowdown and the trade war between the US and China.

President Donald Trump quickly reacted by once again attacking Fed chairman Powell. “Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!” Trump tweeted.

At a press conference, Powell stated that the cut was aimed at supporting the US economy in the midst of threats from abroad, mainly a global slowdown, Brexit and the trade wars.
Powell did not signal further cuts and insisted there was still no cycle in question while defending the central bank’s view that there was no recession in sight.

Saudi Arabia’s ambassador to Germany said on Thursday that “all options were on the table in retaliation” to the weekend attacks on Saudi oil plants that the Kingdom blames on Iran.

US President Trump fell short of pointing at war but talked of “many options.” “There’s the ultimate option and there are options that are a lot less than that. And we’ll see,” Trump said. “I’m saying the ultimate option meaning go in - war.”

US Secretary of State Mike Pompeo said Washington supported Saudi Arabia’s “right to defend itself” during a meeting with Crown Prince Mohammed bin Salman.

The Bank of Japan kept its monetary policy steady on Thursday. The BoJ did not change its short-term interest rate target of -0.1% but signaled expanding stimulus possibly in its next meeting in October. Wary of risks to the economy, Governor Kuroda said foreign demand and producer confidence remained low and thus the October meeting would be crucial in decision-making. But, domestic demanded kept the economy strong, he said.

Chinese and American deputy trade negotiators are scheduled to hold face-to-face talks on Thursday and Friday ahead of next month’s higher-level negotiations to resolve the trade war between the world’s two top economies.

EURUSD

The Euro is climbing up following the US Fed’s mixed messages along with its rather hawkish stance. Today a speech by the member of the Executive Board of the European Central Bank Benoît Cœuré will be in the focus as investors look for direction. The pair price seems set to continue its rise towards the upper band of the inner falling channel, thus forming fourth candle in a set of successive descents and ascents. 1.1055 and later 1.1070 above the upper band will be followed. If the rise goes on, then 1.1100 will be targeted. In the case of a fall 1.1030 and then 1.1000 will be watched.

Support: 1.1030 -1.1000
Resistance: 1.1055 -1.1070 -1.1100

GBPUSD

Little change in the UK pound that holds above the 78.6 Fibonacci retracement after the US Fed’s rate cut and hawkish stance by Chair Powell. The rising risks associated with Brexit continues to be the primary reason for an argument in favor of a downward trajectory. UK’s retail sales will be watched ahead of the Bank of England’s rate decision that is expected to be kept the same. 1.2460 and 1.2445 at the aforementioned Fibo have so far proven to be solid supports. Still below we will follow 1.2400. In the event of a rise, 1.2500 and later 1.2520 can be designated as resistance lines.

Support: 1.2460-1.2445- 1.2400
Resistance: 1.2500 -1.2520

USDJPY

The Japanese yen lost strength after the Bank of Japan maintained short-term interest rate target at-0.1% but warned of external threats to the economy. Governor Kuroda reminded how the latest data showed steeply falling foreign demand but reassured that the domestic consumer market remained strong. The pair price is once again rising and likely to resume its ascent for a fourth consecutive week after falling below the supportive green line that has been in place since the end of last month. 108.25 that is close to the 78.6 Fibonacci retracement is the first resistance to be met with, once broken, we will watch 108.45 that was the recent top. 108.70 will be a two-month high, if reached. In the event of the yen gaining, we will follow 107.90 and later 107.60 as support levels.

Support: 107.90 -107.60
Resistance: 108.25 -108.45-108.70

GOLD

Precious metal went steadied below the 1500 line in the aftermath of the volatility triggered by the US Federal Reserve’s rate decision and Chair Powell’s press conference. Investors are keeping a cautious strace as they try to interpret the Fed’s signals about its next move. Given Powell’s warnings regarding the global slowdown, trade wars and Brexit, the long-term trajectory in gold remains upwards. The price is currently being supported by the 50 percent Fibonacci retracement level that roughly corresponds with 1492. If that line is broken, we will follow 1488 and later 1483, the lowest after the Fed decision. However, in the more likely flip scenario 1500 remains a target to be followed by 1505. Still up, 1510 will be in the focus.

Support: 1492 – 1488 -1483
Resistance: 1500 – 1505 – 1510

BRENT

Oil prices slightly edged up but below the 50 percent Fibonacci retracement level on Thursday after the tensions in the Middle East. Saudis have put all ‘the options’ on table in retaliation to what they and the US claim to be attacks originating from Iran. The brent price holds above 70.00 largely due to market caution as to what kind of response the Saudis and their Western allies might give as President Trump said on Wednesday that more sanctions on Tehran were coming in 48 hours. If the price breaks 71.00, we will watch 71.40. Above there, 72.00 will enter the crosshairs. On the flip side, 70.40 and 70.00 provide solid support. 

Support: 70.40 -70.00
Resistance: 71.00- 71.40-72.00

DAX

The German index opened slightly lower but quickly recouped in at the open after the US Federal Reserve’s rate cut. Investors are currently turning their attention to the US economic data, among them the Philly Fed economic index. ECB member Coeure’s speech will also be important along with the course of preliminary Sino-US talks starting in Washington. The index is likely to resume its ascent towards 12 470 and later 12 500. If the price persists above that level, 12 540 that aligns with the rising line will be followed. In the event of a fall, 12 400 and later 12 350 can be watched.

Support: 12 400-12 350
Resistance: 12 470 -12 500-12 540

ECONOMIC CALENDAR

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