Euro goes one-on-one with US dollar as markets prep for Fed rate hikes

The euro has steadied around parity in the lead-up to tomorrow’s Federal Open Market Committee (FOMC) meeting. The Fed is anticipated to jack up rates by 75 basis points (bp), the same shift that the European Central Bank made earlier this month.

In Sweden, today’s Riksbank monetary policy decision kicks off a busy week for central banks making adjustments to interest rates to combat high inflation.

While the focus will be on the Federal Reserve on Wednesday, other banks expected to make a policy shift in the next few days include the Bank of England, Swiss National Bank, South African Reserve Bank and Norges Bank.

The Bank of Japan will meet on Thursday, but it appears likely that they will maintain ultra-loose monetary conditions despite CPI coming in above forecasts today. Headline inflation was 3.0% year-on-year to the end of August instead of 2.9% forecast, but it did little to sway markets.

USD/JPY has had another quiet session, like most currency pairs today. Treasuries added a few basis points across the curve, with the benchmark 2- and 10-year bonds yielding close to 3.95% and 3.5% respectively

Crude oil has recovered from yesterday’s dip to be trading near to where it started the week. The WTI futures contract is approaching US$ 86 bbl while the Brent contract is a touch above US$ 92 bbl.

Likewise, gold has recovered from overnight losses to be back 1,675 US$ an ounce.

APAC stocks have had a good day after a positive cash session on Wall Street. Futures markets are pointing toward a good start to European and North American equity markets.

The US will see data on housing starts and building permits, while Canada will get CPI numbers.

The full economic calendar can be viewed here.

EUR/USD technical analysis

EUR/USD remains in a descending trend channel after several days of consolidation. The descending trend line is currently dissecting at the same level as the 55-day simple moving average (SMA) at 1.0100 and may offer resistance.

Last week’s peak of 1.0198 could also offer resistance.

On the downside, support might lie at the recent low of 0.9945 and 0.9864 ahead of the 0.9695, the 161.8% Fibonacci Extension of the move between 0.9953 to 1.0369

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