Daily Insights – U.S. Fed says stimulus essential, dollar index rises against rivals - Doo Prime News
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Daily Insights – U.S. Fed says stimulus essential, dollar index rises against rivals

Fundamental Factors:

EUR/USD fell to over-five-weeks low as the U.S Federal Reserve reaffirmed its commitment to supporting the economy and underscored its dovish stance after it concludes its two-day policy meeting on Wednesday. Overall, it was a very dovish tone from the Fed, but it is the U.S. central bank’s move to upgrade the GDP outlook for 2020 that has been supporting the dollar.

Meanwhile, the Bank of Japan kept interest rates unchanged and is slightly more upbeat in the Japanese economy, which suggest that there is no need to carry out further stimulus for the time being. The focus is now on how Bank of Japan Governor Haruhiko Kuroda and the new Prime Minister Yoshihide Suga will work together in order to support the economy with more and more monetary tools are being taken off the table. the BOJ maintained its -0.1% short-term interest rate target and a pledge to cap 10-year government bond yields around zero.

Following the resignation of UK Senior Law Officer Lord Keen, Prime Minister Boris Johnson has partially climbed down on his controversial Brexit plan that will break the international law. The Boris Johnson government has agreed to table an amendment to the bill, which would give MPs a vote on a Commons motion before the powers to “disapply” aspects of the legally-binding Withdrawal Agreement could be invoked.

Technical Analysis:       

Dow Jones: On Wednesday (U.S. time), Dow Jones was up 0.13% while Nasdaq and S&P 500 was down by 1.25% and 0.46%. The Federal Reserve concluded its two-day policy meeting Wednesday by voting to keep short-term interest rates anchored near zero – as widely anticipated. Dow Jones was up by 0.13% or 36.78 points and closed at 28,032.38 points. Nasdaq dropped by 1.25% or 139.85 points to 11,050.47 points. S&P 500 down by 0.46% or 15.71 points and closed at 3,385.49 points. Dow Jones is currently in the correction territory as the index is retreating from the target level of 28,200 which was hit earlier. Keep an eye out on the range bound level of between 28200 and 27500.

Gold: The rise in the US dollar index and US bond yields are putting pressure on the gold prices. Societe Generale expect gold prices can rise further in the first quarter of next year. However, as the global economy recovers, gold prices may face pressure. Looking at the technical chart, gold is forming a triangle-shaped contraction over the short term. Keep an eye out on the support level at the bottom of the triangle as the prices may fall further if the support level is broken.

Crude oil: Offshore oil and gas production in the U.S. are forced to shut down due to Hurricane Sally. The impact of the hurricane is estimated to be between 3 million and 6 million barrels as it is estimated to last for about 11 days. Furthermore, a report showed a sharp drop in U.S. crude oil inventories. These have driven oil prices upward, with WTI crude reaching $40. Oil prices fell after a sharp rise of more than 4% overnight, of which WTI and Brent crude fell below $40 and $42, respectively. Although US Energy Information Administration data confirmed that crude oil inventories has fallen sharply, but the inventory of refined oil products are still increasing. Crude oil is currently in a bullish trend. Keep an eye out on the previous high of $43.5.

EUR/USD: The euro fell more than 100 pips to a low of 1.1768 against the dollar after hitting a high of 1.1882. The currency pair was supported by market expectations on a dovish stance by the Fed. As the U.S. dollar index rebound, the euro are not getting any more support from the fundamentals and hence the currency is having a weak support. Keep tab on whether euro will fall further when the US dollar gain more momentum.\

GBP/USD: The pound rose more than 100 pips against the U.S. dollar, benefiting from a weak dollar ahead of the Fed’s interest rate decision. Gains of the currency pair has narrowed as the dollar index strengthens. Pay attention to the Brexit talks. According to the latest news, UK has made some compromises in the implementation of the Internal Market Bill. Keep an eye on the progress of the bill. Currently, the longs are taking a cautious stance while the shorts are gaining momentum and dragging the currency pair down. GBP/USD is retreating from the 1.28 level that it hit earlier. Keep an eye on the short positions and the target level near 1.25.

The information and analysis included in this report only represent the research analyst’s views. Forex trading involves risk and you are advised to exercise caution in relation to the report. If you are in any doubt about any of the contents, you should obtain independent professional advice.

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