USD Gains Ahead Of The Release Of The Fed’s Meeting Minutes

Fundamental analysis of Forex market

The USD tended to gain against a number of its counterparts yesterday, while gold prices continued to rise for a sixth day in a row and the US stockmarkets sent some mixed signals with Dow Jones retreating while Nasdaq reached new record highs. The market’s attention turns to the release of the Fed’s latest meeting minutes in search for further clues regarding the bank’s stance. The meeting of the Fed mid-June had a notable shift in the bank’s outlook, with the possible date of a rate hike being moved earlier as its projections reflected a higher GDP growth rate and an accelerating inflation. Fed’s Chairman Powell in his remarks at the press conference following the release, had mentioned that it was time to “retire” the notion of “talking about talking about tapering,” as the Fed’s policymakers had allready begun making thoughts for the timing of a tightening of the bank’s QE program. In the minutes, we expect some clarification of what the prerequisites would be for “substantial further progress” towards the Fed’s goals, that would actually signal the possibility of the Fed starting to taper its QE program. Hence, should the hawks prevail in their comments, we may see the USD getting some support as tightening expectations would increase, while if some cautiousness is expressed by Fed’s policymakers still, we may see the USD weakening.

USD/CAD rose yesterday breaking the 1.2400 (S1) resistance line, now turned to support and tested the 1.2470 (R1) resistance level. The stabilisation of the pair during today’s Asian session was noted yet we suspect that the bulls are still not done. The RSI indicator below our 4-hour chart is between the readings of 50 and 70, implying that the bulls have a slight advantage. Should the buyers continue to guide USD/CAD, we may see the pair breaking the 1.2470 (R1) resistance line and aim for the 1.2560 (R2) level. Should a selling interest be displayed by the market, we may see the pair reversing course aiming if not breaking the 1.2400 (S1) support line and aim for lower grounds.

Oil prices steady after wide drop

WTI prices steadied on Wednesday’s Asian session after a steep drop the previous day, as negotiations broke down within the OPEC+ oil producing group and that tended to increase expectations that major oil producing countries, would increase the supply of the commodity to the global markets. The rift between Saudi Arabia, which favored a controlled and low increase of oil production and the United Arab Emirates (UAE), which was against extending supply curbs seemed to remain wide enough to prevent the group from reaching consensus regarding oil production levels. Thus, the market seemed to price-in the possibility that the UAE would split from the agreement, increase its production levels, also given its wide investment to increase production capacity and its wide openings to Asian clientele.

WTI prices tumbled yesterday breaking the 75.00 (R2) and the 73.40 (R1) support lines, both now turned to resistance, like a hot knife through butter. We tend to maintain a bearish outlook for the commodity’s prices given its wide drop, albeit some signs of stabilisation seems also to be in place. It should be noted that the RSI indicator below our 4-hour chart is between the readings of 50 and 30, which could imply that the bears maintain the initiative over WTI’s prices. Should the bears actually maintain control over WTI’s direction as expected, we may see the commodity’s prices breaking the 71.70 (S1) support line and aim for the 69.75 (R2) support level. Should the bulls take over, we may see the pair reversing course, breaking the 73.40 (R1) resistance line and aim for the 75.00 (R2) resistance level.

Other economic highlights today and the following Asian session:

Today we note Germany’s industrial output for May, UK’s Halifax House prices for June, the US JOLTS job openings for May, Canada’s Ivey PMI for June and the US weekly API oil inventories figure.

USD/CAD H4 Chart

Support: 1.2400 (S1), 1.2320 (S2), 1.2230 (S3)
Resistance: 1.2470 (R1), 1.2560 (R2), 1.2650 (R3)

WTI H4 Chart 

Support: 71.70 (S1), 69.75 (S2), 68.10 (S3)
Resistance: 73.40 (R1), 75.00 (R2), 76.75 (R3)