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Markets rallied on risk-on sentiment as investors price in a dovish Fed outlook. The rally, however, remains limited as investors maintain a cautious tone ahead of Fed meeting minutes. The dollar was slightly lower against major rivals as yields tumbled. The New Zealand dollar advanced on strong employment data, while commodities such as Gold and oil paused rallies ahead of the Fed rate hike.
The USD traded -0.77% lower than the Yen ahead of the Fed rate decision. In the Asian session, the BoJ’s Governor Kuroda hinted at a possible shift in the monetary policy in case inflation needs to get back to 2%. Speculations on BoJ’s intervention boosted the Yen’s strength. Focus has turned to a Fed meeting later in the day as forecasts have settled at 75bps even though expectations of a dovish Fed still loom. The pair continues its drop from yesterday’s high at 148.80. A number below 147.00 psychological support may set targets at 145.00 and 140.50.
NZDCAD rallied by +0.54% on Wednesday after a release of better-than-expected New Zealand Employment data. The Employment data rose to 1.3% vs 0.5% surveyed indicating growth in the labour market in New Zealand. On the other hand, the Canadian dollar remains under pressure as oil prices gave in gains ahead of the Fed meeting. The pair extended a 3-day rally from the 0.7880 support level and upside gains are capped by the 0.8000 level. A break above that area could give bulls the 0.8250 level, a 5-month high.
EURAUD dropped by -0.20% despite mixed data from Australia. The Building Approvals rose to -5.8% against -7.0% in September, while Home loans plunged to -9.3% vs -2.7% as higher interest rates begin to bite consumers. The slump in German Manufacturing PMI from 45.7 anticipated to 45.1 underpinned Euro weakness ahead of the ECB day. The bears traded lower towards the 1.53500 level and a break below that level could extend targets towards the 1.4800 level. A break above 1.5700 will invalidate the near-term outlook and bulls may target the 1.6000 level.
European stocks were slightly lower after mixed European economic data. FTSE100 traded lower at -0.09% as the 7200 near-term high remains a strong barrier and 7100 is the next target to the downside. DAX dipped by -0.16% weighed down by energy stocks and critical levels are at 13400 resistance and 13200 support levels. CAC40 edged lower by -0.05% as French Manufacturing PMI data missed expectations coming at 47.2 vs 47.4 forecasted.
US stock futures were steady but slightly higher ahead of the FOMC meeting today. S&P500 futures edged higher by +0.20% after bulls retracted from the 3900-resistance level to 3850 near-term support. However, a failure to break above that level could see bears drop to the 3800 level. Nasdaq100 futures surged by +0.26% and critical levels to watch out for are the 11600 resistance and 11000 support level. DJIA index futures were steady at +0.08% after declining from the 33000 near-term resistance. Near-term resistance is currently at 32500 and a break below that level could open the way for the 32000 psychological level.
Oil markets were slightly lower ahead of the Federal Reserve hike, although supply concerns remain a major tailwind to oil bulls in the near term. Brent crude oil dipped by -0.30% to 94.42 and critical levels to watch out for is the 96.00 resistance and 90.00 support. USWTI crude oil futures tanked by -0.44% and trades are currently trapped between 90.00 high and 85.00 low.
