USD GAINS AFTER HAWKISH FED STATEMENT
The USD strengthened against its peers after the Fed released its interest rate decision. The bank left rates unchanged but signaled that the gradual pace of interest rate hikes will continue arguing that the economy was strong enough to handle another hike. This will be the fourth hike this year. It comes as the Fed faces criticism from the US President who has accused the bank of working against his policies. The bank also indicated that the Fed Chair will start holding a press conference after every rate decision. This is different from what happens today when the Chair holds a press conference once per quarter.
The price of crude oil fell into bear territory yesterday and continued the lower momentum overnight. A security is said to be in bear territory when its price falls by more than 20% from its previous high. The reason for the decline was mostly because of the increased supplies from OPEC and the United States. In a recent statement, OPEC secretary general said that OPEC members were pumping as much crude as they can. In the United States, recent data from the EIA has shown that inventories were on the rise.
Sterling fell against the USD after the Fed’s interest rate decision. Today, the UK will release the first reading of the third quarter GDP numbers and other important data. Over the quarter, traders expect that the economy rose by an annualized rate of 1.5%, which was higher than the second quarter’s growth of 1.2%. On a MoM basis, the economy expanded by 0.6%, which was better than the expected 0.3%. The manufacturing production in September is expected to grow by 0.1%, which was higher than the slump of minus 0.2% in August.
The EUR/USD pair declined sharply after the decision by the Federal Reserve. This is because there were investors who were expecting the Fed to change its language about interest rates. It reached an intraday low of 1.1340. This was the lowest level since November 1. It was also a decline of almost 1.5% from the monthly high of 1.1500. The pair’s moving averages indicators show that the pair will continue moving lower. The RSI on the 30-minute chart is at 23, which is an oversold zone but also an indicator that the downward trend could continue. The Bears Power has also lost momentum as shown below. Therefore, in the short while, the pair could see a minor upward movement but in the next few days, it will resume the downward trend.
The GBP/USD pair ended the sharp upward trend it has been following the past few days. The pair declined from yesterday’s high of 1.3175 to an intraday low of 1.3040. On the hourly chart, the pair’s ADX is currently at 31 and rising. The double EMA indicators have crossed one another which is an indication that the downward momentum could be maintained. While this could happen, the biggest driver for the pair will be economic data from the UK. If data is positive, the pair will resume the upward momentum. If it’s negative, it will likely test the important support level of 1.3000.
The price of crude oil continued making the lower lows, reaching an intraday low of $60.30. This was the lowest level since March this year. The 30-day and 15-day EMA indicators on the four-hour chart show that the pair will continue to decline. At the same time, the RSI is close to the oversold level of 30, which is an indication that it has more room to go down. It is therefore likely that the pair will continue to move down, potentially to the $55 level.