USD slumps ahead of final Fed interest rate decision
The US dollar declined against most currencies as traders waited for the final Fed interest rate decision. The bank, which will deliver its decision later today, is expected to leave interest rates between 0.0% and 0.25%. It will also continue its open-ended quantitative easing policy in its bid to continue supporting the economy. Analysts will be watching out for the language used by Jerome Powell, which will provide guidance on next year's policies. A more hawkish Fed will possibly be good for the US dollar while a dovish one will push the currency lower.
The euro rose against most currencies after better economic numbers from the Eurozone. In a report released earlier today, Markit said that the services, manufacturing, and composite PMIs improved in December. The three rose to 47.3, 55.5, and 49.8, respectively. The three rose from the previous month’s 41.7. 53.8, and 45.3 in a sign that the European economy is on a recovery path. Further data showed that the bloc’s construction output rose by 0.47% in October while the labour cost index rose by 1.6%. In addition, the trade balance rose from 24.5 billion euros in September to 30 billion euros in October.
The British pound rose against the dollar as media reports suggested that the UK and the EU were making some progress on key issues on Brexit. The currency also rose due to the strong output numbers from the UK. According to Markit, the important services PMI increased from 47.6 in November to 49.9 in December. Similarly, the manufacturing and composite PMIs rose to 57.3 and 50.7, respectively. On the negative side, the country’s inflation numbers disappointed in November.
The EUR/USD continued the upward trend after the strong data from Europe. It reached an intraday high of 1.2211, which is the highest it has been since 2018. On the 30-minute chart, the pair is still above the 15 and 25-period EMAs. It has also started forming a bullish pennant pattern, which is usually a sign of continuation. Also, the fast and slow lines of the Stochastic oscillator are above the overbought level. Therefore, the pair will possibly continue rising, with the next target being at 1.2250.
The GBP/USD pair rose to an intraday high of 1.3510 after strong economic data. On the four-hour chart, the pair managed to move above the important resistance of 1.3445. It is also above the lower dots of the Parabolic SAR while the signal and main lines of the MACD indicator have moved above the neutral line. The RSI has also continued rising, meaning that the pair may continue rising even during the American session.
The XAU/USD pair rose to an intraday high of 1,865 ahead of the FOMC decision. On the four-hour chart, the pair is along the 50% Fibonacci retracement level. It is also along the upper side of the Bollinger Bands while the RSI has continued to rise. Therefore, the pair will possibly continue rising as bulls aim for the resistance at 1,875.