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Trading ideas for EUR/USD, USD/CAD and WTI

June 16, 2022

EUR/USD: The euro edged higher as the dollar dipped after the Federal Reserve raised interest rates by 75 basis points in a historic move to fight inflation and projected a slowing economy and rising unemployment in the months to come. The rate hike was the biggest made by the U.S. central bank since 1994, and was delivered after recent data showed little progress in its inflation battle. The Fed believes that higher rate hikes would result in lower employment opportunities and an increase in the jobless rate. Price pressures are soaring sharply and in order to tame them, the Fed is ready to sacrifice the tight labor market. As per the dictations in the conference, Fed chair Jerome Powell is fine with the rising jobless rate to 4.1%, with a stipulation that the inflation should get cornered. On the eurozone front, investors are focusing on the minutes from the Eurogroup meeting. The major agendas are expected to be searching for new oil suppliers. Also, mounting price pressures are a major worry for the responsible authorities. Therefore, some measures could be taken on the same.

SELL LIMIT 1.0454/TP 1.0406/SL 1.0478

 

USD/CAD: The Canadian dollar strengthened against its U.S. counterpart with the currency recovering from a one-month low in choppy trading after the Federal Reserve’s decision to raise interest rates by three quarters of a percentage point. U.S. stocks clawed back some recent losses, bond yields eased and the safe-haven U.S. dollar lost ground as the Fed announced its biggest rate increase since 1994. In a subsequent news conference, Fed Chair Jerome Powell referenced the rarity of the size of the rate increase. Investors have worried that the Fed would not be able to control inflation without triggering a recession. The Fed reiterated that it is committed to returning inflation to its 2% target. They added that economic activity picked up after the negative print in the first quarter. Furthermore, the Fed would continue to reduce its balance sheet as planned in the May meeting.

BUY STOP 1.2903/TP 1.2950/SL 1.2880

 

WTI: WTI futures on NYMEX are moving back and forth after a vertical downside move. The black gold faced a sell-off after failing to overstep the psychological resistance of $120.00. The oil prices are expected to shift into a negative trajectory as the Federal Reserve has underpinned lower growth forecasts for the coming quarters. A rate hike by 75 basis points to fix the inflation mess quickly is going to shrink liquidity from the market. The corporate houses will access costly money from the commercial banks for investing in projects. The unavailability of helicopter money will compel the corporate houses to stick to ultra-filtered investment opportunities only. Lower investment opportunities will worsen the unemployment rate and henceforth result in lower funds for disposal in the palms of the households. Also, it will lead to lower aggregate demand and eventually lower demand for oil.

SELL STOP 113.40/TP 109.70/SL 115.25