US dollar under pressure ahead of the Fed interest rate decision
US stocks ended higher yesterday as the market reflected on the positive signs of a stimulus deal in the next few days. Legislators are coalescing around a proposed $748 billion new stimulus package that avoids thorny issues like state and local government funding and liability for companies. Stocks also rallied because of vaccine progress. Yesterday, a panel of the Food and Drug Administration (FDA) voted for the vaccine by Moderna, meaning that it will also be cleared for use in the near term. The S&P 500 index added about 47 points while the Nasdaq 100 closed at a record high for the 51st time this year.
The US dollar index eased during the Asian session ahead of the final interest rate decision of the year by the Federal Reserve. The FOMC, which started its monthly meeting yesterday, is expected to leave interest rates intact as it continues to support the economy. It is also expected to continue implementing its open-ended quantitative easing program, which has seen it expand its balance sheet by more than $2 trillion this year. Additionally, the bank will likely continue to press Congress for more fiscal support.
The economic calendar will have significant events today. During the Asian session, we received the weekly oil inventory data by the American Petroleum Institute (API). The data showed that the number of inventories rose by more than 1.9 million barrels, higher than the estimated decline of more than 3 million barrels. We also received the flash manufacturing and services PMIs from Australia and Japan. Later today, Markit will release the PMIs from other countries. Also, the Office of National Statistics will publish the latest inflation data from the UK. Also, the US will release weekly mortgage statistics data.
The EUR/USD pair is little changed today as traders look ahead to the Fed interest rate decision. It is trading at 1.2155, where it has been in the past few days. It is also slightly below this year’s high of 1.2177. On the four-hour chart, the price remains above the 15-period and 25-period exponential moving averages. The triple exponential moving average (TRIX) is slightly above the neutral line while the two lines of the stochastic oscillator are slightly below the overbought level. Therefore, the pair will likely have a bullish break-out later today.
The XBR/USD pair rose to an intraday high of 50.05 during the overnight session. It has also formed an ascending triangle pattern that is shown in yellow. Also, the accumulation and distribution indicator has continued to rise, which is a sign that more money is coming in. Therefore, the pair will likely continue rising as bulls attempt to test the important resistance at 60.00.
The GBP/USD pair rose to an intraday high of 1.3445, which is the highest it has been this year. The pair is still slightly below the upper side of the Bollinger Bands while the signal and main lines of the MACD have moved above the overbought level. Also, the Relative Strength Index (RSI) has moved from the oversold low of 30 to the current 60. Therefore, the pair will likely continue rising as bulls aim for the next resistance level at 1.3450.