US Equities gained yesterday on approach to the FOMC Rate Decision and publication of the Rate Statement. The FED left rate on hold at <0.25% as expected and changed little in the statement. Markets seesawed but waited for the press conference. FED Chair Powell spoke about the FEDs continued commitment to “do what we can for as long as it takes”. He commented on the economic situation, noting that the “household spending rebound got help from timely fiscal support” and employment rose strongly in May and June. He said that the contraction in Q2 was likely to be the largest on record and business fixed investment was yet to show a recovery. He also noted that some measures of consumer spending have moved down since June, notably debt and credit card spending. He struck a negative note when he said that “the path forward for the economy going forward is extraordinarily uncertain” and that a “recovery is unlikely until people feel safe”. He added that the FED is seeing signs that a rise in virus cases are weighing on the economy and that the FED “will continue to use powers until we're confident in recovery” adding that the “current economic downturn is severe, will take continued fiscal and monetary support to recover”. During the Q&A FED Chair Powell said that, “Markets started working again after we announced certain programs, so we didn't need to use them. But it's important that they stay in place” adding later that in the FEDs view, the current stance is appropriate, and they are prepared to adjust as appropriate. Market moved more into risk-on territory into the US equity market close and there has been a slight slippage lower during the course of the Asian session. China and Japan are reporting rising numbers of cases along with Australia, where rumours have it that plans are being drawn up to extend the lockdown in the state of Victoria. Yesterday the US death toll from Covid-19 passed the 150,000 mark with increasing pressure on hospitals. Total cases in the US have surpassed 4.5Million. The Japanese 225 closed lower by 0.26%, the Hang Seng is trading higher by 0.7% but the Shanghai Composite is higher by only 0.1% due to geopolitical tensions with the US and rising Covid-19 cases. European Equities are set to open unchanged at present. Gold is trading at 1958.00 as traders seek some safety in the turmoil. USDJPY is trading at 105.233.
German CPI data will be released today and is expected to fall to -0.2% from a prior 0.6%. German Preliminary GDP is expected to fall to -9.0% from -2.2%. Eurozone Unemployment is expected to fall to 7.7% from 7.4%. In the afternoon, US Advance GDP is expected to fall to -34.5% from -5.0%. US Unemployment Claims are expected to rise to 1.44M from 1.416M.
The USDJPY has sold off again after it found resistance at the 109.850 level in June with a move that took price down to the 106.000 area. The pair rallied after finding support in this area and went higher to test the 108.000 level, but the moves in recent days have kept price consolidating between 108.200 and 106.000. An ever tightening range was produced between 106.630 and 107.540. However, a failure to break back above the 108.000 area opened the way for a retracement down to test the 106.480 area followed by the 106.000 level. Price was carried lower with the break of these supports and the pair is currently trading around the 105.270 area, after finding support at 104.775. The 106.000 area acted as support in May and created a major higher low on the chart. The selloff in August found support at 104.450 and produced the rally to the current high at 112.228 and this area may play a part as support. Further support at 104.000 is followed by 103.150 and the 102.500 area. In the short term the 105.300 area is acting as resistance followed by 106.00 and the former support levels at 106.480/106.630. Above the 107.000 round number, the 107.680/107.600 area, may be used as resistance, followed by 108.000 and 108.480, with the 109.500 area above. A rally above the 109.500 level may seek to take price up to engage the 109.700 area of resistance from December which is followed by the 109.850/110.000 area. This area has acted on price in the past and was retested as resistance in February, with a breakout to the high at 112.227. The lower high at 111.700 may also act as resistance. A break above this area may open the path to the pair potentially attempting to gain a foothold above this resistance and establish a base to engage the 113.000 area. A break above this level may seek to test the 114.000 level followed by the potential resistance at 115.000.
The EURGBP chart is showing that the pair has broken down from the March high, 0.9500 level and is currently trading around 0.9089 after finding support at 0.8670. The move lower found some support at 0.9000/0.9070, but this failed at the end of the month and the area has now become a key zone, which price is testing once again. The pair tested 0.9175 at the end of June but was pushed back down to 0.8938 and is now trading at 0.9089, consolidating its position and probing the 0.9100 area. Failure to close above this level has produced a series of overhead wicks on the candles in recent days. Support has been used at 0.9000, and this is followed by potential support at the 0.8900/0.8890 area, with 0.8865 being used as the June low. The rising trend line may offer support at 0.9016. Further support at 0.8813 is followed by the 0.8750 area and the 0.8700 level. A loss of this level may push price down to 0.8660 level. Support may be seen at 0.8645 followed by 0.8620/0.8600. Below this level, the 0.8500 area may be supportive again, followed by the 0.8412 area. The low at 0.8276 from December and then the 0.8250 level may also be used as potential support for the pair.
The 0.9130 area was tested as resistance earlier this week with price finding resistance at 0.9148. Price found support at 0.9000 and has reengaged the 0.9070 area. A move back higher from there, targets the 0.9150 area, followed by the higher high at 0.9176. Above this area the 0.9250 area comes into play followed by the August high around 0.9323. The current high at 0.9500 remains the level to beat for buyers. A break higher may seek to test the 0.9550/0.9560. Beyond this the potential resistance area at 0.9620 might be used ahead of the 0.9700 level. The next area of interest may be found at 0.9720, followed by 0.9750 which may also be used as resistance to any potential move higher, while above the area the 0.9800 area may further resist attempts to push price up to the 0.9900 level. The round number level may also come into play at 1.0000.