FOMC Policy Meeting and RBA cuts in Focus

Nikolas Papas

Nikolas has been involved in the finance industry for over fifteen years spanning across Europe and USA with a depth of knowledge and experience within many aspects of the financial markets. Nikolas gained several years experience with some of the Europe’s leading Brokers, as equity analyst, and trader managing accounts for both Private and Corporate Investors. He enjoys both the fundamental and technical aspects of trading focusing on stock markets and all FX majors. Currently Nikolas provides analysis and comments to online financial publications. Educational background in Economics (BSc), and Finance (MSc).

FRB: Chair Yellen: Testimony before the Joint Economic Committee, U.S. Congress, Washington, District of Columbia

Markets Calm ahead of FED Policy Meeting

June 18, 2019

Asian indices finished higher today except for Nikkei ahead of Wednesday’s FOMC policy meeting and as trade worries resurface. The Nikkei225 finished 0.72 percent lower to 20,972, the Hang Seng benchmark in Hong Kong finished 1.20 percent higher at 27,555. The Shanghai Composite finished 0.09 percent higher to 2,890, while in Singapore, the FTSE Straits Times index finished 0.96 percent higher to 3,237. Australian equities added to early gains thanks to further signs of RBA rate cuts with the ASX 200 index lifting by 0.6 per cent or 39.1pts to 6570.

European session started higher today in a quiet session amid renewed worries about trade relations between the US and China and a rise in geopolitical tensions. DAX30 is adding 0.77 percent to 11,999, CAC40 is 0.07 percent higher at 5,389, while the FTSE MIB in Milan is trading 0.35 percent lower at 20,552. The London Stock Exchange is 0,02 percent lower to 7,356 as the Brexit uncertainty continues.

In commodities markets, crude oil trades lower at 51.67 despite geopolitical tensions around the globe. Oil is down almost 18% from the high in late April, wiping out about half of its rally earlier this year, due to increased global trade worries. Brent oil also trades lower to $60,57 per barrel as major oil producers have yet to agree on adjustments on output. Gold trades higher at 1,345 as bulls are in full control. The precious metal holds above all the major daily moving averages and strong resistance will be met at 1,357 the yearly high.      

XAUUSD Daily Chart

In cryptocurrencies market, bitcoin (BTCUSD) retreats from recent high as traders taking some profits off the table, the daily low for BTC was at 9,019 and the daily high at 9,477. Immediate support for BTC stands now at $9,000 round figure while next support stands at 8,500 the previous week high. On the upside, strong resistance now stands at 9,477 the high from Asian session while I expect extra pressure from sellers at 9,600 and then at 10,000. Ethereum (ETHUSD) trades flat at 268, with capitalization now to 28.7 billion. On the upside, the immediate resistance stands at 287 the recent high while the support stands at 250 round figure, Litecoin (LTCUSD) gives up 6 dollars to 129. The crypto market cap now stands above $283.0B.

On the Lookout: The minutes from RBA meeting released this morning at 11.30am AEST and have essentially confirmed that further easing is on its way. The central bank said that further easing is more likely than not, that lower rates are unlikely to risk a pick-up in borrowing and won’t risk a sharp inflation lift. RBA considers a rate cut in August and another in November as possible.

Investors focus will be this week on the FOMC meeting on Wednesday. The US central bank is expected to keep rates unchanged at 2.5% this week. The week also sees the Bank of Japan and Bank of England policy meetings.

In macro news from America, we await the US building permits for May.

Trading Perspective: In forex markets, USD trades slightly lower at 97.37 ahead of the Fed policy meeting, while the Aussie dollar makes new lows at 0.6832 while Kiwi breached the 0.65 mark and trades at 0.6495.

GBPUSD started the day making a new low at 1.2511 during the Asian session but from that level started a rebound during the European session and as of writing the pair is trading at 1.2540 close to daily high,  as the bearish momentum for Cable is still intact amid growing concerns over Brexit. Major support now stands at 1.25 round figure which if broken might accelerate the slide further towards 1.2480. On the upside immediate resistance now stands at 1.26 while more offers will emerge at 1.2641 the 50-hour moving average. Pound shows persistent weakness amid UK political uncertainty and also on the back of global risk aversion, so any uptick can match excess offers.

In Sterling futures markets the open interest increased by 1K contracts, volume shrunk for the third day in a row, by around 43.5K contracts.

EURUSD started the day on positive foot trading at 1.1240 ahead of the important FOMC policy meeting. The pair trades above the 50-day moving average, on the upside the immediate resistance stands at 1.1262 the 100-hour moving, while more offers will emerge at 1.1270 the 100-day moving average. Support stands at 1.12 round figure, while more bids will emerge at 1.1150 two week lows.

In euro futures markets, the open interest shrunk by 1.3K contracts on Monday, volume, in also went down by around 215.1K contracts.

fomc policy
EURUSD Daily Chart

USDJPY is under pressure today down to 108,21, as traders turn cautious ahead of the FOMC policy meeting. The pair hit the low at 108.20 and the high at 108.57. The pair will find support around 108.00, on the upside immediate resistance for the pair now stands at 109 round figure. The USD price dynamics will continue to drive the pair’s momentum as traders focus shifts to FED next move on Wednesday.

USDCAD started in quite a mood the week and trading as of writing at 1.3408 as the retreat in crude oil prices, Canada’s main export item seems to have added further weakness in the Canadian Dollar (CAD). The pair will find immediate support at the 200-day moving average around 1.3250 while extra support stands at 1.3200 round figure. On the upside immediate resistance now stands at the 1.35 zone before an attempt to 1.3560 recent high from 31st May.

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