The price of crude oil declined sharply in the American session after Saudi Arabia announced that it will restore output earlier than expected. At a press conference, the new Saudi Arabia Oil Minister, Prince Abdulaziz bin Salman, said that the supply was intact and that customer supply needs will be met. The Minister also said that all the necessary activities to restore production will be finished before the end of the month. This statement was relatively positive compared to earlier reporting by the Financial Times that said production could take months to come back to normal. Still, the ultimate impact of the weekend’s attack will depend on how Saudi and the US reacts. It will also depend on whether there will be other attacks.
The Japanese yen weakened slightly after the country released its trade numbers. Data showed that exports declined for the ninth straight month. Provisional data showed that in August, exports declined by -8.2%, which was worse than the -1.5% in July. It was slightly better than the consensus estimates of -10.9%. Imports declined by -12.0%, which was worse than the consensus estimates of -11.2% and August’s -1.2%. Exports to China declined by 12.1% while those to South Korea declined by 9.4%. Japan and South Korea have been involved in a trade conflict for the past two months.
Today, traders will focus on the Federal Reserve, which is expected to release its interest rates decision. Traders expect the Fed to lower interest rates by 25 basis points to 2.00% and will want to know whether the rate will be attributed to ‘mid-cycle adjustment.’ Traders will also be interested in how far the Fed is prepared to go to accommodate the economy.
Traders will also focus on Europe, where they will receive key data. From the UK, they will receive the CPI data, which is expected to show that the CPI declined from 2.1% to 1.8%. On a MoM basis, the CPI is expected to have increased slightly to 0.5%. The core CPI is expected to have declined slightly from 1.9% to 1.8%. In the European Union, the CPI is expected to have remained unchanged at 1.0%. On a MoM basis, traders expect the CPI to have increased slightly from -0.5% to 0.2%. These numbers will mean little to traders because the ECB has already slashed rates and announced the restart of quantitative easing.
Meanwhile, from North America, traders will receive the CPI data from Canada and housing data from the United States. The Canadian CPI is expected to have remained unchanged at 2.0%. On a MoM basis, the CPI is expected to have declined from 0.5% to -0.2%. The core CPI is expected to have risen slightly from 2.2% to 2.0%. In the United States, the housing starts are expected to have increased by 4.5% after declining by -4.0% in July.
The EUR/USD pair paused in the Asian session after rising sharply in the American session. In the session, the pair rose from 1.0990 to a high of 1.1075. On the hourly chart, the pair is trading along the 7-day moving averages and slightly above the 14-day moving averages. The 14-day money flow index has dropped slightly from the extreme level of 95 to the current 74. Today, the pair will likely see some major movements ahead and after the Fed delivers its decision. The key points to watch will be 1.1000 and 1.1100.
The XBR/USD pair declined sharply in the American session. The pair dropped from an intraday high of 68.72 to a low of 62.82. On the hourly chart below, the pair is still trading higher than where it was on Friday. As a result, the pair has formed a gap, which will likely be filled within a few days. However, this can take longer as the situation in the Middle East is still volatile. The ATR indicator has remained trading higher while the pair is trading below the 14-day and 7-day moving averages. The pair will likely move lower as it tries to fill the gap.
The USD/JPY pair continued moving higher, reaching a high of 108.22. The pair has been on an upward trend since August when it traded at 104.45. On the four-hour chart, the pair is trading above the 14-day and 28-day moving averages. The 14-day RSI has remained slightly below the overbought level of 70 while the accumulation/distribution indicator has continued to move higher. The pair will likely continue moving higher ahead of the Fed rates decision. This could change afterward as traders react to the news.