US: Another shutdown?

There seems to be another US Government shutdown, at least for a few hours as Senate has failed to reach a compromise to approve a temporary funding bill. Republican Senator Rand Paul has delayed a Senate vote on a bipartisan budget agreement for deficit reasons. White House has already instructed government agencies to prepare for a shutdown. The shutdown may prove to be temporary though as the Senate will come to a vote before the start of the US working day. US Dollar, could weaken somewhat from the developments, especially should the shutdown be realized and prolonged.

EUR/USD traded in a sideways manner yesterday, slightly above the 1.2230 support zone. We see the case for the pair to continue to trade in sideways manner with a bearish tone. The argument is based on the downward trend line which begins on Friday last week as well as the weak RSI. It should also be Cable dropped yesterday and tested the 1.3875 support level. Should the bears be in the driver’s seat we could see the pair head south, breaking the 1.2230 support line and aim for the 1.2100 support barrier. On the other hand should the bulls take the reins, we could see the pair breaking the 1.2355 resistance level and aim for the 1.2455 resistance hurdle.

All eyes on the BoE

BoE is widely expected to remain on hold, keeping interest rates at +0.50%. Market has priced in the scenario with a probability of 98.58%. The bank may want to retain flexibility ahead of the Brexit negotiations uncertainty, regarding the future rate hike path and hence avoid committing to any further rate hikes. We also see the case for forecasts of stronger growth and maybe lower inflation rates with a horizon of two years. We expect the overall effect of the voting, inflation report and inflation letter to be supportive for the GBP.

Cable dropped yesterday and tested the 1.3875 support level. We could see the pair rising today, as mentioned in the fundamentals before. Should the bulls take the reins we could see the pair breaking the 1.4040 resistance line and aim for the 1.4168 resistance level. On the other hand, should the bears take the driver’s seat, we could see the pair breaking the 1.3875 support line and even the 1.3749 support zone.

RBNZ stands pat

RBNZ kept it’s interest rate unchanged at 1.75% as was widely expected by the market. The accompanying statement had a rather dovish tone. Specifically, the monetary policy is to remain accommodating for a considerable time and inflation rate to reach 2% in 2020. Also, it was commented that the NZD rise was largely due to US Dollar move. Later on RBNZ Governor stated that he is quite comfortable with current NZD position and not concerned about it. Overall, we see the case for the outlook to weaken the NZD, as possible future rate hikes have been “pushed” further into the future.

NZD/USD started the day in a sideways manner yesterday and dropped later on and during today’s Asian morning, as forecasted yesterday, breaking the 0.7250 support level, now turned to resistance. We see the case for the pair to continue to drop for a short while and stabilize later on. Should there be further selling orders, we could see the pair breaking the 0.7180 support level and aim for the 0.7417 support barrier. On the other hand should the pair find fresh buying orders we could see it breaking the 0.7250 resistance line and aim for the 0.7370 resistance hurdle.