Wall Street ended the day at an all-time high as Jerome Powell testified to Congress. In his testimony, the Chair said that the Fed was fully prepared to slash interest rates based on mounting risks to the US economic outlook. Despite excellent jobs numbers released on Friday, Powell said that uncertainties about the outlook have increased in previous months. Analysts and investors believe that the Fed will slash interest rates in the upcoming meeting by 25 basis points. In response to the testimony, the S&P 500 index crossed the psychologically-important level of $3,000 for the first time in history. In his testimony, Powell said:
Economic momentum appears to have slowed in some major foreign economies, and that weakness could affect the US economy. Moreover, a number of government policy issues have yet to be resolved, including trade developments, the federal debt ceiling, and Brexit. And there is a risk that weak inflation will be even more persistent than we currently anticipate.
The Canadian dollar was relatively unchanged after the BOC delivered its interest rates decision. The bank left interest rates unchanged at 1.75% for a sixth consecutive meeting. The bank officials also lowered the global growth forecast for the year to 3% from the previous estimate of 3.2% as a result of the ongoing trade tensions. It predicted that the Canadian economy will grow by 1.3% this year, which was slightly higher than their previous estimate of 1.2%. It also raised its forecast for a Q2 growth to 2.3%, up from the previous projection of 1.3%. In the monetary policy statement, the bank said that it was in no hurry to hike or lower interest rates.
Today, investors will receive the CPI data from Germany, France, Sweden, Ireland and the United States. In the US, the core CPI is expected to remain unchanged at 2.0% while the headline CPI is expected to decline slightly to 1.6%. Investors will also receive jobless claims for the US. Agricultural traders will receive the World Agricultural Supply and Demand Estimates (WASDE) from the Department of Agriculture. Furthermore, the ECB will publish the account of the monetary policy meeting held in June.
The EUR/USD pair rose sharply after Jerome Powell laid ground work for an upcoming rate cut. The pair is now trading at 1.1275, which is the highest level since July 5. It is higher than the week’s low of 1.1192. On the hourly chart below, the price is above the 50-day and 25-day moving averages. It is also along the 38.2% Fibonacci Retracement level. The RSI has moved above the overbought level of 70 while the momentum indicator remains above the 100 level. It’s likely that the pair will continue moving higher to test the 50% Fibonacci level and then resume the downward trend because the rate cut was already priced in.
The XBR/USD pair rose sharply after the US released its inventory data. Over the past week, inventories decreased by more than 9 million barrels. On the four-hour chart below, the pair’s price is the highest level it has been since June 3. The price is along the 50% Fibonacci Retracement level and along the upper line of the Bollinger Bands. The pair will likely make a pullback to the 38.2% Fibonacci level of $65 and then resume the upward trend.
The USD/CAD pair moved lower in the Asian session and is currently trading at 1.3050. On the four-hour chart, the pair appears to be forming a double bottom pattern. The current price is below the 14-day and 28-day moving averages. The accumulation/distribution indicator has continued to move lower while the RSI indicator too is declining. The pair could resume the upward trend if it indeed forms a double bottom pattern when it retests the 1.3038 low.