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Fed doesn’t mind strong dollar

December 16, 2021

USD/CAD: The loonie rose against U.S. dollar on Wednesday, rebounding from its lowest level in nearly four months as the Federal Reserve signaled that its inflation target had been met and that it would hike rates in 2022. The U.S. central bank issued new economic forecasts showing three rate hikes on cards over the next year and announced that it would end its bond purchases in March. The Canadian dollar was trading 0.1% higher at 1.2836 to the greenback. In the event of a further decline in oil prices, as well as the resumption of dollar purchases, the Canadian dollar will face pressure again. This scenario is most likely. Immediate resistance can be seen at 1.29. A breakout to the upside can trigger growth towards 1.2960.

BUY STOP 1.29/TP 1.2960/SL 1.2880

 

EUR/USD: The euro strengthened on Wednesday after the U.S. Federal Reserve’s monetary policy decision didn’t look overly aggressive. The Fed announced that it would end its bond purchases during pandemics in March and pave the way for a three-quarter percent rate hike by the end of 2022 if it pulls out of the enacted policy at the beginning of the health crisis. Today, market sentiment will depend on the outcome of the European central bank governing council’s meeting. Since no changes in the forecast for next year’s inflation are expected, the euro may continue to decline. Immediate support is seen at 1.1250. A breakout below could take the pair towards 1.12.

SELL STOP 1.1250/TP 1.12/SL 1.1270

 

GBP/USD: The British pound climbed to more than one-week highs on Wednesday after data showed U.K. inflation data zipped to a decade high, increasing expectations of a rate hike as early as February. While markets on Wednesday estimate more than a 60% probability of interest rate increase, up from 50% on Tuesday, the emergence of the Omicron variant of the coronavirus may force policymakers to hold off from tightening policy. Data released on Wednesday showed British consumer price inflation had surged to its highest in more than 10 years in November. Immediate support is seen at 1.3220. A breakout below could take the pair towards 1.3150.

SELL STOP 1.3220/TP 1.3150/SL 1.3240