- Central banks in the US, UK and euro area will update the market on interest rate policy.
- Tuesday’s release of US inflation and UK unemployment figures will set the tone for banks’ announcements.
- The manufacturing business report caps off a busy week in terms of news flow.
This week, all eyes will be on executives from the three major central banks to update the market on interest rate policy.of us federal reserve system, the Bank of England and the European Central Bank are all due to make their monthly announcements in the coming days. Any statement could send a shockwave through the foreign exchange market, given the relatively high price volatility levels of recent times.
USD
Most analysts expect the Federal Reserve to keep interest rates on hold when Jerome Powell and his team meet on Wednesday. That doesn’t mean that volatility won’t increase before and after the announcement, as Powell’s comments could trigger price changes in the USD Basket Index. The index currently sits between two important price levels, giving it room to move before it encounters significant support or resistance. Currently, the RSI reading on the daily price chart is 50.7, indicating that the price may show significant upward or downward price movements before becoming overbought or oversold within that period. Further confirmed.
USD Basket Index – Daily Price Chart – 50 Midrange and RSI
Source: IG
Key number to monitor: Wednesday 13th December 7pm (GMT). Federal Open Market Committee (FOMC) interest rate decision: Analysts expect interest rates to remain unchanged at 5.5%. A press conference and further guidance will be held at 7:30 p.m.
Main price levels: 102.16 – Support in the form of the 20 SMA on the daily price chart, and 104.55 indicating the area where the 50 and 100 daily SMA converge.
euro dollar
The ECB raised interest rates 10 times in a row from July 2022 to October 2023. Although interest rates are expected to remain unchanged on Thursday, some of the ECB’s statements remain more hawkish than the bank’s. The release of Germany’s ZEW index is scheduled for Tuesday, and the German Manufacturing PMI report will be released on Friday. These will provide further insight into the euro area’s most important economies.
Signs that Germany’s economy is recovering, and cautious guidance from the ECB, could see the eurodollar’s value rebound. The EURUSD is currently at an important support level after last week’s decline in value. The price level of 1.07644 marks the 38.2% Fibonacci retracement level of the July-October euro price crash. Just below that are the 50 and 100 SMAs on the daily price chart, converging in the 1.07442 and 1.07175 areas.
Daily Price Chart – EURUSD – Fib Retracement and SMA Support
Source: IG
Key number to monitor: Wednesday 13th December 1:15pm (GMT). European Central Bank interest rate decisions. Analysts expect the benchmark interest rate to remain unchanged at 4.5%, but guidance from bank executives may be important.
Main price levels: 1.07644 – Support formed by the 38.2% Fib retracement.
pound dollar
The rise in the price of the pound increased the value of GBPUSD by more than 5.5% in October and November. Last week’s price drop will put that trend to the test and could push GBPUSD closer to the support trend line for its move.
Bank of England Governor Andrew Bailey is expected to announce that UK interest rates will remain unchanged at 5.25%, and a break above the trend line around 1.250 would open the door for further price declines and a test of 1.240. This is also the area of the 50 and 100 SMA on the daily price chart.
Tuesday’s unemployment figures will set the tone for the bank’s announcement expected on Thursday. Analysts now expect both unemployment and wage levels to rise. Unemployment is expected to be 4.3%, and hourly wages are expected to increase 6.7% quarter-on-quarter. Governor Andrew Bailey’s decision-making will be tested as the threat of stagflation looms over the UK economy, and his guidance on the Bank’s priorities is expected to drive GBPUSD price action.
Daily Price Chart – GBPUSD – Daily Price Chart – Trendline Support?
Source: IG
Key number to monitor: Thursday 14th December 12pm (GMT). Bank of England interest rate decisions. Analysts expect the UK benchmark interest rate to remain unchanged at 5.25%.
Main price levels: 1.2500 – area of support trend line and psychologically important “round number” price level.
US dollar yen
With little Japan-specific data released this week, USDJPY price movements are likely to be influenced by reports coming out of the US. Tuesday’s CPI inflation report is not the Fed’s preferred measure when considering inflationary pressures in the U.S. economy. Still, the announcement, just one day before the interest rate decision, is sure to influence investors’ thinking.
The intraday low of 141.62 recorded on December 7th is a multi-month low for USDJPY. It has been more than six months since the dollar-yen price traded well below the 100 SMA on the daily chart, and although the medium-term outlook is bearish, short-term gains and tests of major SMAs are likely. is possible. No discount.
USDJPY – Daily Price Chart – Break of 100 SMA
Source: IG
Key number to monitor: Wednesday 13th December 7pm (GMT). Federal Open Market Committee (FOMC) interest rate decision: Analysts expect interest rates to remain unchanged at 5.5%. A press conference and further guidance will be held at 7:30 p.m.
Main price levels: 148.38 – 100 SMA area on the daily price chart.
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