Today forex traders will embrace a ‘Super Thursday’ with big central banks – the Fed and BoE – announcing their monetary policy decisions.

Early this morning Federal Reserve stood firm on interest rates but indicated that the economy is picking up at a ‘solid rate’, versus ‘moderate’ rate used in September. This suggests December rate hike is still largely on the table, and the likelihood of December hike is now standing at 98.2%, according to CME’s FedWatch tool.

As this decision is largely within market’s expectation, the US dollar index was mostly unchanged last night at the 94.5 area. Market participants are waiting for the nomination of the next Fed chair to assess future monetary policy shifts. Current Fed governor Jerome Power is believed to be the most promising candidate, who will likely bring certainty and consistency to the rate hike path.

The Bank of England will announce its interest rate decision tonight at 20:00 Singapore time. The central bank is widely expected to raise interest rates for the first time in nearly a decade, as the fast depreciation in sterling has sent the country’s inflation rate to 3% and the economy has showed signs of solid growth recently. However, a 25bps rate hike has largely been priced-in already. Therefore, the Bank of England needs to promise further rate hikes in 2018 in order to give GBP and treasury yield a boost. Otherwise, a dovish-biased statement could send Sterling lower tonight.

In Asia positive earnings sent Hong Kong shares higher on Wednesday. The Hang Seng Index surged 1.23% or 348 points to 28,594, driven by insurance names (2628 HK, 2318 HK) and technology shares (700 HK). Technically, the Hang Seng Index is ranging between 28,100-28,750 over the past few weeks. Upside is limited by relatively high valuation and the downside is cushioned by improved fundamentals.

Technical Analysis:

  • The 10-Day Simple Moving Average is trending upwards, but SuperTrend (10,2) is still sloped downwards, suggesting no clear direction at the moment
  • Immediate support could be found at the 1.320 area (50% Fibonacci Retracement) and the 1.311 area (61.8% Fibonacci Retracement) respectively
  • Price has to breakout above resistance 1.330 in order for the SuperTrend to change colour and confirm an uptrend.

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