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The DAX index has posted small losses in the Wednesday session, continuing the lack of movement which has characterized the week. Currently, the index is at 12,363, down 0.09% on the day. In economic news, there are no eurozone or German events. In the U.S, the focus is on the Federal Reserve, which virtually certain to raise the benchmark rate to a range between 2.00% and 2.25%. On Thursday, Germany releases Preliminary CPI and GfK Consumer Climate.

After posting strong gains last week, the DAX has shown limited movement since Monday. The week started with the U.S imposing tariffs on some $200 billion in Chinese goods, and China responding with tariffs of $60 billion on U.S imports. Previous rounds of tariffs between the two economic giants have rocked the equity markets, but investors have shrugged off these latest tariffs. Chinese equity markets have actually improved on Wednesday, as investors are optimistic that Chinese stimulus measures will minimize the damage to the Chinese economy from the U.S tariffs. However, there may be more headwinds ahead, as China sharply attacked the U.S this week, saying it had plunged “a knife to China’s neck” with the new tariffs. The Chinese have canceled trade talks with the Trump administration, and no new talks are likely to be held until the mood improves between the world’s two largest economies.

All eyes are on the Federal Reserve, which is widely expected to raise rates by 25 basis points at the conclusion of its policy meeting on Wednesday. What will be the tone of the rate statement? The U.S economy is in excellent shape, with GDP for Q2 expected at 4.2%, and unemployment hovering below 4 percent. However, the escalating global trade war has raised concerns that it could cool down global economic growth and hurt the U.S economy as well. Still, another rate hike in December is pegged at 78%, according to the CME, and some experts are predicting up to four rate hikes in 2019.

EUR/USD is steady in the Wednesday session. Currently, the pair is trading at 1.1771, up 0.03% on the day. On the release front, there are no eurozone or German events. In the U.S, the focus is on the Federal Reserve, which virtually certain to raise the benchmark rate to a range between 2.00% and 2.25%. On Thursday, there are key indicators on both sides of the pond. Germany releases Preliminary CPI, while the U.S will publish Final GDP and durable goods orders.

All eyes are on the Federal Reserve, which is widely expected to raise rates by 25 basis points at the conclusion of its policy meeting on Wednesday. What will be the tone of the rate statement? The U.S economy is in excellent shape, with GDP for Q2 expected at 4.2%, and unemployment hovering below 4 percent. However, the escalating global trade war has raised concerns that it could cool down global economic growth and hurt the U.S economy as well. Still, another rate hike in December is pegged at 78%, according to the CME, and some experts are predicting up to four rate hikes in 2019.

The euro briefly pushed past the 1.18 line on Monday. This followed hawkish remarks from ECB President Mario Draghi, who was testifying before the European Parliament Economic and Monetary Affairs Committee. Draghi said there had been a “relatively vigorous pick-up in underlying inflation”. With regard to the ECB's forward guidance, Draghi said that the ‘”through the summer of 2019″ was a timeline in which conditions warrant a first rate increase. This means that the September meeting will be a live meeting, with many analysts predicting a rate hike in December.

Trade tensions have escalated this week, with the U.S and China slapping tariffs on each other. On Monday, the U.S imposed tariffs on some $200 billion worth of Chinese goods, while China responded with tariffs of $60 billion on U.S products. There may be more headwinds ahead, as China sharply attacked the U.S, saying it had plunged “a knife to China's neck” with the new tariffs. The Chinese have canceled trade talks with the Trump administration, and no new talks are likely to be held until the mood improves between the world's two largest economies. Previous rounds of tariffs between the two economic giants have boosted the U.S dollar, but so far, investors have reacted calmly and have not dumped their euro assets in favor of the greenback.

Merkel weakness doesn't faze Euro

Is Angela Merkel seeing the beginning of the end of her long run as German Chancellor? Yesterday's vote for her party's parliamentary head suggests as much. The Christian Union parties unexpectedly dumped Volker Kauder, a close Merkel ally, and instead elected Ralph Brinkhaus. This adds further pressure to Merkel's leadership and boosts opposition parties (the right-wing AfD, for instance) that hope to end Merkel's grand coalition. Still, it was not a rout – the vote was close, and the newly elected party chairman confirmed that he would be backing Merkel. All in all, it is a weak revolution within CDU/CSU coalition.

So we see no reason for German growth to slow down in the second half of 2018. Domestic demand continues to support the economy, especially services, although manufacturing is deteriorating amid US protectionism. Economic indicators are encouraging. Trading along 1.1767, EUR/USD is expected to bounce higher, heading along 1.18.

WWTFD?

What would the Fed do – i.e. the US Federal Reserve in its monetary policy meeting that ends later today? Yesterday US consumer confidence came in at a 5-year high, driving hopes that GDP will sustain its current rate of acceleration. Domestic spending is likely to remain high, but slowing in exports will offset the optimism. Also on the downside, key goods such as cars and housing are being priced out of access to most Americans. This could slow expenditures and increase saving. The Fed's meeting should not surprise. We expect a 0.25% rate hike now and another 0.25% in December – as already expected – and no change in policy. It would be a shock if the FOMC did not increase rates.

It appears the Fed will stay its course for a total of four hikes in 2018, three hikes in 2019 and one hike in 2020 (there are calls on the street for a hike in 2021). According to a major German bank, there is a strong Forex pattern where markets sell USD on the day of Fed decision, and then buy the USD the day after. For a short-term trade, it looks interesting.

WTI oil eased from new 2 ½ month high at $72.79 on comment from US President about high oil prices and unexpected build in US crude stocks.

Bulls faced strong headwinds after Trump’s message, with API report on Tuesday showing crude stocks unexpected climb (2.90 million barrels vs previous week’s build of 1.25 million barrels).

Technical studies are firmly bullish on daily chart and see current action as consolidation before bulls continue.

Bulls are taking a breather at $72.77 Fibo barrier (76.4% of $75.34/$64.43 descend, break of which would open way for extension towards $74.67 (10 July high) and key barrier at $75.34 (04 July high), the highest since Nov 2014.

Strong bullish sentiment was soured by recent comments but remains in play and supportive for further advance.

Release of EIA crude stocks report will be closely watched for fresh signals. Today’s expectations are for 1.27 million barrels draw (vs last week’s 2.05 million barrels draw), which should maintain positive sentiment if release comes in line with forecast.

Stronger than expected draw in oil inventories would boost oil prices for further advance, while deeper pullback could be expected if crude inventories fall below expectations or show build.

Such scenario would risk retest of broken Fibo 61.8% barrier at $71.17, with stronger bearish acceleration expected to test next pivotal support at $70.42 (30 July former high) reinforced by rising 10SMA.

Res: 72.36, 72.77, 73.64, 74.00
Sup: 71.82, 71.17, 70.42, 70.00

The European Single Currency appreciated 0.15% against the US Dollar since Tuesday's session. The rate was located at the 1.1765 mark on Wednesday morning.

In regards to the near future, the rate should break the resistance of the monthly R1 at the 1.1765 due to support of the 55-hour and the 100-hour SMAs. It is expected that the rate will trade near the weekly R1 at the 1.1830 on Wednesday.

On the other hand, a lot of significant fundamental news will be released during the day, which might break most of the technical indicators to move downwards or upwards.

The British pound appreciated 0.50% against the US Dollar since Tuesday's session. On Wednesday morning, the rate was located at the 1.3177 mark between the monthly R1 at 1.3185 level and the 50.00% Fibo.

In the near-term future, most likely, the rate will break the monthly R1 at the 1.3185 due to support of the 100-hour simple moving average. The rate may be traded at 1.3200 level on Wednesday.

On the other hand, the resistance of the monthly R1 at the 1.3185 mark could push the rate to trade downside near the weekly PP at the 1.3144 mark. The predictions may be broken by fundamentals. Watch out for news!

The US Dollar appreciated 0.11% against the Japanese Yen since Tuesday's session. During Wednesday morning hours, the US Dollar was located at 112.82 mark.

In regards to the near future, the rate will surge towards the weekly R1 at the 113.10 mark on Wednesday. Most likely, the rate will be traded in the 113.00 area with the support of the 55-hour and the 100-hour SMAs during the trading day.

On the other hand, the rate could get affected by fundamentals, which will occur during the day. Watch out for news!

The gold price appreciated 0.26% since Tuesday's trading session. On Wednesday morning hours, the yellow metal was located between the simple moving averages at the 1,2010 mark.

In regards to the near-term future, the yellow metal will wait for simple moving averages break-out to push gold to move up towards the 61.80 Fibo or down towards the monthly PP at the 1,1956 mark.

Besides, the US crude oil inventories data release at 14:30 GMT and the US Federal Funds rate data release at 18:00 GMT could affect the market to push gold upside or downside on Wednesday.

EURJPY is looking more neutral over the last 4-hour sessions as prices climbed towards last week’s 5-month high of 133.10 on Tuesday. However, the aforementioned top has been acting as resistance, hence the upside momentum appears to have run out of steam as prices have been attempting and failing to close above 133.10, though there is support from the 20-simple moving average (SMA).

The neutral bias in the near term is also supported by the RSI, which has been flattening above the 50 level, while the MACD oscillator lost its strong positive momentum and dropped below the trigger line.

Should the pair manage to strengthen its upside movement and overcome 133.10, the next resistance could come around the 133.50 – 133.80 zone, taken from the highs on April and February 2018. Above this level, the next target could come from the 134.20 hurdle, identified by the trough on January 30.

However, if prices are unable to break the return line of the short-term ascending channel, the risk would shift to the downside, with the 131.90 once again coming into focus, which coincides with the 40-SMA. A drop below this level would push the pair until the 23.6% Fibonacci retracement level of the upleg from 124.90 to 133.10, around 131.16.

Looking at the near-term picture, EURJPY has been trading within an upward sloping channel since August 15, after the pullback on the 124.90 obstacle.

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.17479
Open: 1.17654
% chg. over the last day: +0.13
Day's range: 1.17580 – 1.17683
52 wk range: 1.0571 – 1.2557

The technical pattern on the EUR/USD currency pair is ambiguous. The trading instrument is in a sideways trend. Investors took a wait-and-see attitude before the Fed's decision on the interest rate. Local support and resistance levels are: 1.17500 and 1.17800, respectively. We recommend opening positions from the key levels.

The news feed on 2018.09.26:

New home sales in the US at 17:00 (GMT+3:00);

Fed interest rate decision at 21:00 (GMT+3:00).

Indicators do not send accurate signals. The price has crossed 50 MA.

The MACD histogram is near the 0 mark.

Stochastic Oscillator is located in the neutral zone, the %K line has crossed the %D line. There are no signals.

Trading recommendations

Support levels: 1.17500, 1.17100, 1.16700
Resistance levels: 1.17800, 1.18100

If the price fixes above the resistance level of 1.17800, the EUR/USD quotes are expected to rise. The movement is tending to 1.18250-1.18500.

An alternative may be the decrease of the EUR/USD currency pair to 1.17100-1.16700.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.31191
Open: 1.31778
% chg. over the last day: +0.45
Day's range: 1.31682 – 1.31751
52 wk range: 1.2361 – 1.4345

Yesterday, the bullish sentiment was observed on the GBP/USD currency pair. The growth of quotes exceeded 60 points. At the moment, the technical pattern is ambiguous. Investors expect additional drivers. The key support and resistance levels are 1.31500 and 1.32000, respectively. We recommend opening positions from these marks.

The news feed on the UK economy is calm.

Indicators do not send accurate signals: 50 MA has crossed 200 MA.

The MACD histogram is located in the positive zone, but below the signal line, which gives a weak signal to buy GBP/USD.

Stochastic Oscillator is in the neutral zone, the %K line has crossed the %D line. There are no signals.

Trading recommendations

Support levels: 1.31500, 1.31000, 1.30700
Resistance levels: 1.32000, 1.32400, 1.32800

If the price fixes below 1.31500, the GBP/USD quotes are expected to decline. The movement is tending to 1.31000-1.30700.

Alternative option. If the price fixes above the round level of 1.32000, we recommend considering purchases of GBP/USD. The target movement level is 1.32400-1.32800.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.29544
Open: 1.29498
% chg. over the last day: +0.01
Day's range: 1.29507 – 1.29581
52 wk range: 1.2059 – 1.3795

The technical pattern on the USD/CAD currency pair is ambiguous. Quotes are in a sideways trend. Investors expect additional drivers. The key support and resistance levels are 1.29400 and 1.29650, respectively. The positions should be opened from these marks. We recommend paying attention to the US news feed.

The news feed on the economy of Canada is calm.

The price has fixed between 50 MA and 200 MA, which are strong dynamic support and resistance levels.

The MACD histogram is near the 0 mark.

Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which indicates the bullish sentiment.

Trading recommendations

Support levels: 1.29400, 1.29100, 1.28800
Resistance levels: 1.29650, 1.30000, 1.33000

If the price fixes below 1.29400, the USD/CAD quotes are expected to decline. The movement is tending to 1.29100-1.28800.

Alternative option. If the price fixes above the resistance of 1.29650, it is necessary to look for entry points to the market to open long positions. The target movement level is to 1.30000-1.30300.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 112.749
Open: 112.970
% chg. over the last day: +0.15
Day's range: 112.751 – 112.912
52 wk range: 104.56 – 114.74

There is a variety of trends on the USD/JPY currency pair. At the moment, local support and resistance levels are 112.700 and 113.000, respectively. Investors expect the Fed decision on a key interest rate. We recommend paying attention to the US government bonds yield. Positions should be opened from the key levels.

The publication of important economic reports from Japan is not planned.

Indicators do not send accurate signals: the price is testing 50 MA.

The MACD histogram approached the 0 mark. There are no signals at the moment.

Stochastic Oscillator is in the neutral zone, the %K line is crossing the %D line. There are no accurate signals.

Trading recommendations

Support levels: 112.700, 112.450, 112.100
Resistance levels: 113.000, 113.500

If the price fixes above the round level of 113.000, the USD/JPY quotes are expected to rise. The movement is tending to 113.500-113.750.

An alternative may be the decrease of the USD/JPY currency pair to 112.450-112.100.