USD Continues to Solidify its Position While the Rest of the Market Struggles

A busy week ahead for Central Banks with 6 scheduled events from across five countries. Market participants are mainly concentrating on the Federal Reserve which is predicted to increase interest rates by 75 basis points, bringing the Federal Fund Rate (FFR) to 3.25%.

Overall, the risk appetite of the market seems to be low with most assets in the red. Bitcoin hit a 3-month low, declining by 4.62% over the past 5 hours ahead of today’s market open. The US stock market is also down today with NASDAQ seeing the strongest decline at 0.70%.

Gold and crude oil are also lower than the market open price. The US Dollar, on the other hand, is in the green! The US Dollar Index has increased by 0.22% this morning and is almost at a 2-week high. Some analysts believe the USD can increase above its yearly high throughout this week but, of course, the price movement will depend on the Fed’s announcements.

Crude Oil

The price of crude oil fell this morning and is now close to Friday’s price lows. The price has now declined for 6 consecutive hours and is approaching previous support levels. Traders are contemplating whether the price will form a bearish breakout or if the price will rebound.

Crude oil 30-minutes chart on September 19th

The price of crude oil has received some positive news from their main buyers - China! Chengdu has confirmed that they will reopen today and lockdown restrictions will be instantly lifted. The positive news is that the move is likely to increase demand for energy products such as crude oil. However, some economists have advised that this may actually pressure the price further going forward. The lockdowns in Chengdu only lasted 18 days which is much shorter than the 2 ½ months experienced by Shanghai. According to local reports, the success of the zero policy in Chengdu can trigger more lockdowns elsewhere.

Analysts have also advised that the price of crude oil has been pressured by Iran increasing supply specifically to Asian countries. According to reports, the country has provided 20 million barrels of crude oil over the past 3 months - most of which have been bought by China. Iran also is still awaiting a decision on the “nuclear deal” and if approved, the market is likely to witness a change in the balance of supply and demand.

In addition to the above, the price continues to be pressured by the increasing interest rates across global economies. Higher interest rates are predicted to trigger a lower demand in the longer term. However, CFD traders, of course, will continue following the current price movement.

EUR/USD

The price saw a strong spike on Friday which took the exchange rate outside of its latest recurring price range. However, the price this morning has declined by 32 PIPs which has taken the instrument back within the previous range and again below parity. When looking at indicators we can see the price is trading below all moving averages and most indicators have now crossed over downwards indicating a downward price movement. Oscillators such as the CCI (Commodity Channel Index), are also indicating a potential downward price movement.

Investors are definitely pricing in a 75-basis-point increase in interest rates by the US regulator. However, some economists are pointing to a possible hike of 100 basis points at once. If this does take place, the price can react strongly as it’s not predicted across the market. In addition, the Federal Reserve is expected to publish updated forecasts for inflation and economic growth. Many traders are eager to see if the Central Bank believes that the rate hikes will trigger worsening economic conditions.

EUR/USD 1-hour chart on September 19th

Quick Summary:

• Bitcoin falls to a 3-month low.
• Most assets open in the red except for USD which is close to yearly highs.
• Investors are pricing in a 75 basis point hike by the Federal Reserve.
• Crude oil sees some positive news but still remains pressured by global interest rates and higher supply from Iran.