USDCAD is moving in the Descending channel and the market has reached the lower high area of the channel
The 3.3% previous reading and the 3.8% expected reading for the Canadian CPI data resulted in a higher-than-expected 4% print. The data released yesterday has strengthened the Canadian dollar.
Following high inflation on both core and headline prints (YoY) in the Canadian CPI, the Canadian dollar gained strength. The headline read’s upward trend in crude oil prices has been a significant factor. Every province saw an increase in the CPI as rent index increased the cost of housing. Meanwhile, US building permit data significantly decreased housing starts while exhibiting some notable improvements over forecasts.
Crude oil Analysis
Crude oil price has broken the Box pattern in upside
This data indicates a possible slowdown in the US housing market, even though it is unlikely to have an impact on the Fed tomorrow. With recent strong jobs data to support it, inflation data is now being used by the money markets to price in another rate hike by the Bank of Canada (BoC). Anticipating tomorrow, if the Fed’s statement is interpreted as dovish, USD/CAD may continue to decline. Later this evening, Kozicki of the BoC will be in the spotlight, and it will be interesting to see how he responds to the most recent inflation report.
XAUUSD Gold price is moving in the Descending triangle pattern and the market has reached the lower high area of the pattern
Gold prices are rising in relation to the US dollar, and since no change in the FED outcome is anticipated tomorrow, gold prices are continuing to rise.
The price of gold (XAU/USD) is centred around $1,930 on Wednesday during Asian trading hours. Ahead of the FOMC Press Conference and the Federal Reserve’s (Fed) Interest Rate Decision, market participants would rather stay out of the market. These occurrences might be the cause of the market’s volatility. A measure of the US dollar’s value relative to six major currencies, however, has bounced back from a weekly low of 104.81 and is now flat at 105.10. The US 10-year Treasury note’s yield, which is currently hovering around 4.365%, has reached its highest point in 16 years, which may limit the US dollar’s (USD) decline. The interest rate range of 5.25% to 5.5% is widely expected to persist when the Federal Reserve (Fed) announces its two-day monetary policy meeting on Wednesday. The CME Fedwatch Tool indicates that there is a 99% chance that rates will remain unchanged at its September meeting. Nonetheless, the CME FedWatch Tool indicates that there was a decrease in the likelihood of an additional rate hike during the meetings in November and December.
During his press conference, Fed Chairman Jerome Powell will provide some insights regarding inflation expectations and the “dot plot.” It is important to remember that growing interest rates increase the opportunity cost of holding non-yielding investments, suggesting that precious metals are not likely to do well. Next, gold traders will be watching Wednesday at 18:00 GMT for the much-awaited Fed interest rate decision. This development might provide a clear path for gold prices. The BoJ’s monetary policy meeting is set for Friday, and the BoE will reveal its benchmark rates on Thursday later this week.
EURGBP is moving in the Descending channel and the market has reached the lower high area of the channel
The Euro is expected to gain in the upcoming months due to the decreasing differences between the interest rates of the ECB Bank and the FED. Today, the FED prefers to pause the rate, which helps the euro relative to the US dollar.
Commerzbank economists assess the EUR outlook following the ECB’s key rate hike last Thursday and President Christine Lagarde’s indication that the ECB is now most likely nearing the end of its rate hike cycle. The degree to which the ECB’s monetary policy council may still be willing to consider raising interest rates in the future should become more apparent over the next few days and weeks. rather than what prerequisites would need to be satisfied for such a move. Given that the market appears to be betting on an end to the rate hike cycle, which could pave the way for rate cuts next year, such remarks should generally help the EUR. Comments implying that rate reductions might still be far off would be advantageous to the euro.
It might also turn out, though, that most Council members concur that the rate-hike cycle has come to an end. The EUR may then face pressure to depreciate as the market is more likely to see this as the ECB taking a dovish stance. Naturally, the US Fed is the centre of attention in the near term. For the most part, the FX market will wait to see what surprises the Fed has in store before making its rate decision on Wednesday.
EURJPY is moving in the Box pattern and the market has rebounded from the support area of the pattern
According to Japan’s FX Diplomat Kanda, we communicate with the US on a daily basis about FX deals, and any unwanted movement is fixed through discussion beforehand.
According to Reuters, Japan’s top currency diplomat, Masato Kanda, made vocal intervention remarks early on Wednesday. Responding suitably to FX movements maintaining close contact with foreign and US FX authorities. Closely watching FX moves with high sense of urgency. Regular communication regarding currency exchange takes place between US authorities and Japan. mutual recognition of the negative effects of excessive forex movement
EURNZD is moving in an Ascending channel and the market has reached the higher low area of the channel
The Kiwi is expected to rise in relation to interest rate differentials, according to ANZ Bank economists, and rate hikes by the RBNZ are dependent on data.
The alleviating 4.6% increase in WMP at the GDT auction could reassure markets that the downside risk to the NZD is contained, even in the absence of strong evidence to support a move higher.
GBPCHF is moving in the Box pattern and the market has reached the horizontal support area of the pattern
On Thursday, it is anticipated that the Swiss National Bank (SNB) will increase additional interest rates by 25 basis points (bps), from 1.75% to 2%. The Swiss central bank is expected to keep its restrictive stance in place to ensure price stability as the latest nation’s inflation showed a 1.6% YoY increase, which is still below the 2% target.
GBPAUD is moving in an Ascending channel and the market has reached the higher low area of the channel
Vice-chairman of the NDRC National Development and Reform Commission stated that despite numerous challenges and economic shifts, China is working to meet its 2023 annual growth target and economic objectives.
The National Development and Reform Commission (NDRC) Vice Chairman of China stated on Wednesday that “the economy faces a lot of difficulties and challenges.” Policies for domestic macrocontrol work well. will work to meet goals for yearly economic growth.
GBPCAD has broken the Ascending channel in downside
The UK CPI for August came in at 6.7%, down from the previous reading of 6.8% and less than the 7% forecast. After the reading was published, the value of the UK pound fell.
According to the economic calendar below, the UK CPI release missed on headline and core inflation, respectively. Food was the biggest downward contributor, while motor fuel was the biggest upward influence. This is not shocking, as reports from the global CPI show that the increase in crude oil prices has caused central banks to become cautious about future expenses. We saw core inflation at these levels in early 2023, after which prices increased even though inflationary pressures somewhat subsided. Although headline readings are encouraging, they are still far below target levels, having last seen in February 2022. BoE officials will take heart from the slowdown in retail sales because it appears that consumers are feeling the effects of the tight monetary policy environment.
The PPI’s increase, however, is concerning because it is typically a leading indicator of future increases in CPI figures because producer prices are frequently passed on to consumers. If the cost of energy keeps rising, this might very well be the case. The effect on money market pricing for the Bank of England (BoE) has not changed much since the announcement and is still pointing to a 25 bps rate hike tomorrow with a roughly 79% probability. I do not think there will be any surprises here, and the future interest rate cycle will depend heavily on forward guidance.
AUDCAD is moving in the Box pattern and the market has rebounded from the support area of the pattern
The Australian dollar enjoys favourable trade relations with China in the areas of tourism, exports, education, and real estate. The Australian Dollar is directly impacted by China’s economic expansion in relation to counter pairs.
Following some tentative signs of improvement in China data, the AUD began to drift higher. OCBC Bank economists talk about the future of Australia. In the long run, we still expect the AUD to trade higher due to expectations that China’s growth may eventually stabilise, potential improvements in Australia-China relations, and a more moderate to soft USD profile as the Fed approaches the end of its tightening cycle and starts a rate-cutting cycle in 2024.
We have discussed how improving ties between China and Australia could help Australia’s tourism, education, and real estate industries—all of which could be good for the Australian dollar. The degree of CNH swings, the strength of the USD or an unexpected extension of the Fed tightening cycle, the outlook for global growth if DM’s slowdown worsens, and any market risk-off event are the main downside risk factors that could impact the AUD outlook.
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