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Fed chair Jerome Powell delivered a balanced tone in Tuesday’s speech noting slowing inflation and the need for further rate hikes, particularly after last week’s hot jobs data. The Australian dollar appreciated, helped by a somewhat hawkish tone from the RBA on Tuesday. Investors await the Fed and ECB officials line up.
AUDUSD rose +0.35% capitalizing on the dollar weakness and extending Tuesday’s gains. On Tuesday, the RBA added 25bps to their interest rates bringing it to 3.35%, signalling further rate hikes on the way. The greenback traded south after Fed chief Jerome Powell acknowledged that inflation was slowing though there is still a need to raise rates further to meet the 2% target. An extended rally may be challenged by 0.7000 psychological resistance and 0.7050 while a slide may revisit 0.6850.
EURGBP fell -0.22% trading below 0.8900 in the mid-European session. The EUR failed to rally after ECB officials gave mixed comments on rate hikes. The sterling strengthened despite a quieter calendar on the day. The pair left an intraday resistance at 0.8910, sliding towards 0.8850 resistance-turned-support.
CADJPY traded flat at +0.01% after trimming down early session gains from the 98.00 intraday high. Earlier, the Japanese adjusted current account for December rose to 118.21 trillion vs the 1.25 trillion surveyed. Further losses on the CAD were limited by upbeat oil prices on the day. The pair is currently capped at 99.34 and may revisit the 101.17 high.
European equities edged higher with a focus on corporate earnings. The UK100 rose +0.51% trading above the 7900 May 2018 high. Further up the index may seek the 8000 psychological high. The CAC40 surged +0.27% trading slightly below the 7200 high. DAX gained +0.29% after establishing a low at 15 370 and is faced with an immediate high at 15 500.
US stock futures were quite mixed in the European trade session. The Nasdaq100 futures rose +0.14% in a range between 12674 low and 12765 high. An extended move higher may be capped by 12950. The S&P 500 futures were down -0.06% after establishing a high at 4168. Bears may be challenged by 4120 while bulls may seek 4200 in the near term. The DJIA futures lost -0.03% down from 34180. Further up bulls may be capped by 34 380.
Oil markets extended their recovery modestly as commodities rallied on growing optimism about the recovery in Chinese demand. USWTI crude oil futures advanced by +0.44% after bouncing off the 72.5 support level. Upside gains are capped by the 82.00 high. Brent crude oil rose by +0.27% and critical levels to watch are 89.00 resistance and 79.00 support level. A release of US Crude oil inventories will gauge intermediate-term demand for the black liquid.
