Trading plan for 14/06/2017:
On Wall Street a clear rebound was noticed and new all-time highs were reached at closing market prices. However, the overnight Asian trading session remained subdued. EUR/USD has been trading in the past several days in a tight range (1,1185-1,1235) and is currently in the middle of this range. USD/JPY is around 110.00 again and awaits today's data. After a surprisingly high API report on crude oil inventories, WTI prices drop to around $46.00.
Wednesday, June 14, will be a super busy day in the financial markets because the event calendar is packed with important news releases. China will unveil the Industrial Production data, the UK will present the Claimant Count Change and Unemployment Rate reports, and the eurozone will post the Employment Change and Industrial Production data. The US will publish the Consumer Price Index, Retail Sales, Crude Oil Inventories and FOMC Metting and Press Conference.
Analysis of EUR/USD for 14/06/2017:
The Consumer Price Index and Retail Sales data is scheduled for release at 12:30 pm GMT, Crude Oil inventories will be published at 02:30 pm GMT. Additionally, FOMC Interest Rate Decision, Statement, Economic Projections, and Press conference are expected at 06:00 pm GMT and 08:30 pm GMT respectively.
Market participants expect the FED to hike the interest rate from 1.00% to 1.25% today. Expectations for a rate hike this week are so high that it would be a shock if the FED did not decide on it. More important will be what the FOMC will communicate about future policy formulation. Markets are quite skeptical about the pace of monetary tightening, but the Fed has reason to stick to its current strategy of one more hike by the end of the year and three more in 2018. Moreover, in recent weeks, the vast majority of the FED policymaker did not give any signals to change the market expectations against the June increase, which makes this element of the decision less interesting.
The FED Economic Projections need a small revision because since the publication of recent forecasts in March data from the US economy have shown weaker GDP growth for the first quarter. Nevertheless, FED said in the earlier comments that policymakers are prepared for this and treat the slowdown as temporary, expecting acceleration in next quarters. The Preliminary GDP for the second quarter confirm this scenario, so no significant changes in GDP forecasts are expected. Regarding the inflationary pressures, the monthly inflation reading was still below expectations, but again, the FED policymakers continue to emphasize their expectations for inflation to rise to 2%. The US jobs market is still showing a high level of performance with the unemployment rate way below the FED projected level of 4.7%, which means the US jobs market is close to the maximum level of employment that does not generate economic imbalances. The last but not least thing is to keep an eye on the FOMC Statement language, that should take into account the latest data coming from the economy. Changes are possible. FED should acknowledge the low unemployment rate and a slowdown in GDP growth rate and inflation. Moreover, during the press conference, Janne Yellen should mention that the US economic growth is going as planned by the FED policymakers, so there is no reason to depart from the path of gradual monetary tightening.
Let's now take a look at the EUR/USD technical picture on the H4 timeframe. The market keeps trading in a narrow horizontal zone between the levels of 1.1236 - 1.1163 as it awaits the data. In a case of a rate hike, the price should break down below the golden trend line support and head lower towards the level of 1.1108 and 1.1075. In a case of a no rate hike situation, the price would have to spike up towards the level of 1.1300 and 1.1350.
Market Snapshot: Crude Oil lower after API data
Crude oil prices decreased towards the 78%Fibo level again after a miss in the API data yesterday. Currently, the price is approaching the level of $45.52, but it might fall lower towards the technical support at $45.21. If bulls want to regain control over this market, they need to break above the technical resistance at the level of $46.73 and $48.24. Otherwise the bias will remain bearish.
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