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Content Of The Fed’s Meeting Minutes

The dollar continued to rise for a third consecutive day near a three-month high level yesterday while US stockmarkets were also on the rise as S&P 500 and Nasdaq traded at record high levels, while Dow Jones also covered some ground. The Fed’s minutes for the bank’s mid-June meeting, which were released reaffirmed the bank’s for tapering its asset purchases as soon as this year. Fed policymakers seem to be of the opinion that substantial further progress on economic recovery “was generally seen as not having yet been met,” yet some policymakers expect the economic recovery to continue the bank must be ready to act if inflation or other upside risks materialise. Some policymakers felt that conditions for tapering the bank’s QE program may be “met somewhat earlier than they had anticipated,” while others saw required more clarity in the data according to the minutes. The bullish bias seems to continue, and we may see the markets focusing today on the release of the US weekly initial jobless claims figure.

The USD index continued to rise and tested the 92.75 (R1) resistance line. We tend to maintain a bullish outlook for the index, given that it continues to follow the upward trendline incepted since the 6th of July. We note that the RSI indicator below our 4-hour chart is near the reading of 70 implying that the bulls still have the upper hand. Should the bulls actually maintain their control over the index’s direction, we may see the Dollar Index breaking the 92.75 (R1) resistance line and aim for the 93.45 (R2) resistance level. Should the bears take over, we may see the index reversing course, breaking the prementioned upward trendline and aim if not break the 92.30 (S1) support line.

EUR traders await Lagarde’s speech

Today the ECB is expected to unveil the results of the its 18-month strategy review, which is to redefine the bank’s inflation target and also clear how the bank perceives its role in fighting climate change. It should be noted that it’s the bank’s fist review in 18 years and the new strategy may signal the initiation of one of the biggest transformations for the relatively young central bank. The ECB is expected to part from its current wording of “close but below 2%” inflation target and adopt a clear-cut 2%, which in the past had given the impression of the bank worrying about inflation overshooting its target rather than undershooting it. The main question is whether the bank is willing to allow for inflation to overshoot its target on a temporary basis in order to rebalance the market more or less like the Fed, yet such a scenario may face fierce competition from the inflation worried Germans and BuBa President Weidman. Nevertheless, should clues for such a scenario be present in Lagarde’s press conference, it could allow for bearish tendencies to emerge for EUR. EUR/USD continued to drop yesterday testing the 1.1785 (S1) support line. We tend to maintain a bearish outlook for the pair yet the pair seems to find considerable support at the 1.1785 (S1) level. For our bearish outlook to change in favour of a bias for a sideways movement initially we would require a clear breaking of the downward trendline incepted since the 6th of July. Please note that the RSI indicator below our 4-hour chart is at the reading of 30 which confirms the presence of the bears. Also please bear in mind that the divergence between the 50 moving average (green line) and the 200 moving average (orange line) seems to be widening to the downside, which also tends to point towards the bears. If the selling interest for the pair is extended, EUR/USD could break the 1.1785 (S1) support line and aim for the 1.1695 (S2) level. Should the bulls take over, we may see the pair reversing course and aim if not break the 1.1885 (R1) resistance line

Other economic highlights today and the following Asian session:

Today we note Germany’s trade data for May, the US weekly initial jobless claims figure, the US EIA crude oil inventories figure and China’s inflation measures for June.

USD Index H4 Chart

Support: 92.30 (S1), 91.75 (S2), 91.30 (S3)
Resistance: 92.75 (R1), 93.45 (R2), 93.90 (R3)

EUR/USD H4 Chart

Support: 1.1785 (S1), 1.1695 (S2), 1.1605 (S3)
Resistance: 1.1885 (R1), 1.1995 (R2), 1.2090 (R3)

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