• USD/CHF seesaws around the intraday low of 0.9076, down for the sixth consecutive day.
  • Normal RSI conditions favor the pullback towards the weekly low.
  • The 0.9100 threshold adds to the upside barriers.

USD/CHF drops to 0.9078, down 0.05% on a day, ahead of Wednesday’s European session. The Swiss major recently took a U-turn from 100-HMA amid normal RSI conditions.

As a result, traders can expect further weakness in the USD/CHF prices towards the weekly bottom of 0.9060.

However, 0.9050 and the monthly low near 0.9000 will challenge the bears afterward.

Meanwhile, an upside clearance of a 100-HMA level of 0.9085 needs validation from 0.9100 to aim for the 61.8% Fibonacci retracement of September 08-10 downside, around 9145.

During the USD/CHF pair’s further upside beyond 0.9145, the September 08 low of 0.9156 can question the bulls targeting the monthly top of 0.9200.

USD/CHF hourly chart

Trend: Bearish

 

EUR/USD is still seen between 1.1750 and 1.1920 in the near-term.

Key Quotes

24-hour view: “We noted yesterday that ‘upward momentum has improved a tad’ and held the view that EUR ‘could continue to edge upwards to 1.1900’. We highlighted that ‘a break of the major resistance at 1.1920 is unlikely’. While EUR edged higher as expected (high of 1.1899), we did not quite anticipate the swift decline from the high (overnight low of 1.1838). The rapid pullback has room to extend lower but any weakness from here is viewed as part of a lower trading range of 1.1815/1.1880. In other words, a sustained decline below 1.1815 is unlikely.”

Next 1-3 weeks: “There is not much to add to our latest narrative from last Friday (11 Sep, spot at 1.1825). As highlighted, EUR is likely in a consolidation phase and could trade between 1.1750 and 1.1920 for a while. Looking forward, when EUR moves out of this range, there is another solid support and resistance at 1.1680 and 1.2020 respectively. To look at it another way, the current mixed momentum coupled with the presence of solid support and resistance levels suggest EUR may not be able to embark on a sustained directional move anytime soon.”

FX option expiries for Sept 16 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

– EUR/USD: EUR amounts

  • 1.1835 654m 

– GBP/USD: GBP amounts        

  •  1.3000 357m 

– USD/JPY: USD amounts         

  • 105.00 837m
  • 105.15 360m
  • 105.20 691m
  • 105.25 365m
  • 106.15 376m
  • 106.25 450m
  • WTI extends Tuesday’s run-up to refresh one week high near $39.30.
  • Almost a quarter of oil output goes offline as hurricane Sally moves towards the Persian Gulf.
  • US dollar stays on the back foot for the third day in last four ahead of the Fed meeting.
  • API data flashed surprise draw, EIA inventories awaited.

WTI rises to $39.25, up 1.64% on a day, before traders in Brussels arrive for Wednesday’s work. The black gold recently picked bids as energy output loss, due to the hurricane Sally, joins price-positive stockpile data from the American Petroleum Institute (API). Also favoring the oil buyers could be the US dollar weakness and a mild recovery in the market’s risk-tone sentiment.

As per Reuters, relying on the US government updates, “500K bpd (barrels per day) of offshore crude oil production and 28% of natural gas output shut in the Gulf of Mexico on Tuesday according to the US interior Government.”

The stoppage in the output can be compared with Tuesday’s API Weekly Crude Oil Stock, -9.517M versus +2.97M, for the period ending on September 11.

With the halt in energy output joining the surprise draw in private inventory data, WTI traders anticipate the official stockpile figures, published by the Energy Information Administration (EIA, to defy the 2.049M forecast versus 2.032M prior.

Other than the oil specific catalysts, the declines in the US dollar index (DXY) also favor the commodity prices. The greenback gauge drops 0.05% to 93.04 while flashing a three-day losing streak by the press time. The reason for the USD’s weakness could be traced from the market’s pre-Fed cautious sentiment.

Furthermore, S&P 500 Futures also reverse the early-day losses to rise 0.10% to 3,399 as we write. Although markets struggle for a clear direction, US President Donald Trump’s comments that the coronavirus (COVID-19) vaccine could be three or four weeks away favored the risk-takers off-late.

While EIA data and hurricane headlines will be the key to determine near-term oil prices, the US dollar moves on the back of the Federal Reserve’s action also become important to watch.

Technical analysis

Sustained trading above 100-day SMA, currently around $37.80/85, directs the WTI quote towards the $40.00 round-figures ahead of highlighting the 200-day SMA level of $40.95.

 

  • EUR/JPY fades pullback from an intraday low of 124.52.
  • Bearish MACD, failures to keep bounces off the key Fibonacci retracement favor sellers.
  • 200-bar EMA, monthly falling trend line challenge buyers.

EUR/JPY prints 0.15% intraday losses while easing to 124.73 ahead of Wednesday’s European session.

Given the pair’s another downside break of 200-bar EMA, sellers are currently targeting a 61.8% Fibonacci retracement of the run-up from July 24 to September 01, around 124.45. Also acting as an additional filter to the EUR/JPY south-run is July 30 top around 124.30.

Should the quote manages to drop beneath 124.30, bears can aim for 123.90 and the 123.00 threshold.

Alternatively, a sustained break of 200- bar EMA, currently around 125.10, will direct buyers towards a falling trend line from September 01, at 126.13 now.

If at all the EUR/JPY bulls manage to cross the stated resistance line, the resultant upward trajectory can aim for 126.50 and the monthly top of 127.07.

EUR/JPY four-hour chart

Trend: Bearish

 

  • EUR/USD has risen back to levels near 1.1850. 
  • The yuan sell-off likely put a bid under EUR/USD. 
  • Federal Reserve is expected to reiterate the dovish stance. 
  • Dollar buying could emerge if the central bank raises growth forecasts.

EUR/USD has recovered early Asian session lows, possibly tracking a continued rally in China’s yuan. However, big gains may remain elusive in Europe on caution ahead of Federal Reserve’s (Fed) rate decision. 

The pair is currently trading mostly unchanged on the day at 1.1848,  having hit a low of 1.1829 early Wednesday. At one point, the single currency looked set for a deeper decline to 1.18. 

However, the selling pressure weakened, allowing recovery after the People’s Bank of China’s decision to raise the daily yuan fix by most in five months triggered broad-based US dollar selling. 

China’s central bank set the yuan reference rate at 6.78725 per US dollar – the highest level since May 9, 2019, and up 397 pips from Tuesday’s fix of 6.8222. The yuan rose to a fresh 16-month high of 6.7682, extending the 4% quarter-to-date gain. 

Additional bullish pressure for the EUR may have stemmed from reports that UK’s Prime Minister Boris Johnson is prepared to compromise with Tory party rebels over the Brexit bill. 

All eyes on the Fed

The US central bank is expected to keep interest rates unchanged at record lows and reiterate tolerance for high inflation. The markets have already factored the odds of rates remaining low for a prolonged period. The Fed funds futures show implied rates pinned down near zero well into 2023, according to Reuters. 

As such, the focus would be on the Fed’s growth and inflation forecasts. If the Fed raises the growth outlook, the greenback would pick up a bid, sending EUR/USD, as noted by BK Asset Management’s Kathy Lien. 

Ahead of the Fed decision, the pair may take cues from the Eurozone Trade Balance and the US Retail Sales data. 

Technical levels

 

  • EUR/GBP refreshes weekly low while declining for the third day in a row.
  • Multiple highs marked in July, 10-day EMA lures the bears.
  • Consolidation of overbought RSI suggests further weakness in EUR/GBP prices unless breaking 0.9300.
  • UK CPI is expected to recede from prior 1.0% YoY to 0.0% in August.

EUR/GBP fades pullback from 0.9172 around 0.9180 amid the pre-European session open trading on Wednesday. In doing so, the quote portrays the cautious sentiment ahead of the UK’s Consumer Price Index (CPI) data for release for August, up for publishing at 06:00 GMT.

Even so, a retracement of the overbought conditions, as per the RSI, suggests the further weakness of the EUR/GBP prices.

While portraying the same, the pair traders may conquer June month’s high of 0.9175 to aim for multiple highs marked in July around 0.9145/40.

It should, however, be noted that the 10-day EMA near 0.9130 and the 0.9100 threshold can question the quote’s further weakness.

Meanwhile, the monthly top of 0.99291, followed by 0.9300 round-figures, can continue challenging the EUR/GBP buyers ahead of directing them to the yearly peak of 0.9499.

EUR/GBP daily chart

Trend: Further weakness expected

 

  • USD/INR’s bounce lacks momentum to pierce key SMA hurdle. 
  • The weekly chart suggests scope for a deeper drop to a multi-year rising trendline. 

USD/INR is again having a tough time scaling the descending 5-week simple moving average (SMA) hurdle. 

The pair jumped by 0.29% on Tuesday but failed to keep gains above the 5-week SMA at 73.677. The average also capped the upside last week. 

Another failure to beat the bearish MA line would reinforce the negative outlook put forward by the bearish marubozu candle created in the third week of August and shift risk in favor of a drop to the ascending trendline rising from January 2018 lows. 

At press time, the rising trendline support is located at 72.34. The below-50 reading on the 14-week relative strength supports the bearish case. 

A convincing move above the descending 10-week SMA, currently at 74.27, is needed to invalidate the negative outlook. 

Weekly chart

Trend: Bearish

Technical levels

 

Speaking at a town hall hosted by ABC News in Philadelphia late Tuesday, US President Donald Trump said a vaccine against the coronavirus could be three or four weeks away.

Key quotes

“We’re very close to having a vaccine.”

“If you want to know the truth, the previous administration would have taken perhaps years to have a vaccine because of the FDA and all the approvals. And we’re within weeks of getting it… Could be three weeks, four weeks.”

“Yeah, well, I didn’t downplay it. I actually, in many ways, I up-played it, in terms of action. My action was very strong,” when confronted on downplaying the pandemic.

Related reads

  • Coronavirus vaccine needed to lift bond yields – BoFA survey
  • WHO: Pause in AstraZeneca’s COVID-19 vaccine trial shows it is well-run

Analysts at JP Morgan note their expectations from Wednesday’s US Federal Reserve (Fed) monetary policy and its implications for the euro.

Key quotes

“Market was looking for clarification on AIT together with forward guidance, recent Fed speak has suggested that this will now be unlikely.”

“Powell will likely face numerous questions regarding Jackson Hole.”

“The SEP will be closely watched for clues, where the forecast horizon rolls to 2023 and will likely show rates on hold through this period.”

“While the committee will recognise the improvement in domestic data (especially unemployment), Powell will still paint a dovish, uncertain outcome.” 

“Overall, the meeting should be a fairly uneventful one and we remain long euro.”