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USD Gains On Hawkish Comments

The US dollar gained against a number of its counterparts yesterday, as Fed policymakers seem to make their case for a tightneing of the Fed’s monetary policy. It’s characteristic that NY Fed President Williams yesterday reiterated what was included in the Fed’s interest rate decision last week, namely that a tapering of asset purchases may soon be warranted. It should be noted that US yields tended to be on the rise and the 10 year yield even reached a three month high providing support for the USD. It should be noted that Nasdaq retreated also affected by the hawkish comments and rising yields, as also did the Dow Jones. Today we highlight Fed Chairman Powell’s testimony, while traders may also the release of the US consumer confidence for September.

Nasdaq dropped yesterday breaking he 15300 (R1) support line, now turned to resistance and continued lower yet bounced on the 15125 (S1) support level. The index seems to have stabilised somewhat, yet bearish tendencies seem to continue to simmer below the surface. Please note that the RSI indicator below our 4 hour chart, is just below the reading of 50, which could imply a slight advantage for the bears. Should the bearish tendencies actually instigate a selling interest of the market once again, we may see the index breaking the 15125 (S1) support line and take aim of the 14950 (S2) level. Should buyers be in control of the index’s direction we may see Nasdaq breaking the 15300 (R1) resistance line, thus paving the way for the 15500 (R2) resistance level.

Pound rises yet gains remain capped

The pound tended to be on the rise against the USD, despite USD’s strengthening, but also against the EUR, JPY and CHF yesterday, typical of the support GBP enjoyed. Expectations among pound traders about Bank of England starting to hike rates next year tended to be on the rise thus providing support for the pound, as monetary policy is expected to tighten maybe earlier than expected. It’s characteristic that BoE Governor Bailey stated yesterday that he and other members of the Monetary Policy Committee believe that there will be a need for a modest tightening of policy given the inflationary pressures in the UK. On the other hand, it should be noted that market worries for the energy crunch in the UK tended to tame the pound bulls as petrol stations in the UK are reported to run dry due to shortages of truck drivers, yet the UK Government is to introduce measures to ease the pressure. Given the low number of financial releases today from the UK, we expect fundamentals to take the lead for the pound.

GBP/USD rose yesterday yet the sideways motion between the 1.3750 (R1) and the 1.3600 (S1) levels seems to continue. We tend to maintain our bias for a sideways motion of cable as long as the prementioned levels continue to encapsulate the pair’s main body of the price action. Also please note that the RSI indicator below the 4-hour chart is just above the reading of 50,implying a rather indecisive market, yet at the same time reflecting also yesterday’s strengthening of the pound. Should the bulls take over, we may see the pair breaking the 1.3750 (R1) resistance line and aim for the 1.3875 (R2) resistance level. Should the bears be in charge of cable’s direction, we may see the pair breaking the 1.3600 (S1) support line and aim for the 1.3430 (S2) support level.

Other economic highlights today and the following Asian session:

Today during the European session, we get Germany’s GfK consumer sentiment for October and in the American session the US consumer sentiment for September. We have a high number of monetary policy makers speaking today, yet we highlight two, namely ECB President Lagarde which is to speak before EDB’s two days central banking forum and Fed Chairman Powell testifying before the US Senate.

US 100 Cash H4 Chart

Support: 15125 (S1), 14950 (S2), 14720 (S3)

Resistance: 15300 (R1), 15500 (R2), 15700 (R3)

GBP/USD H4 Chart

Support: 1.3600 (S1), 1.3430 (S2), 1.3300 (S3)

Resistance: 1.3750 (R1), 1.3875 (R2), 1.3990 (R3)


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