Midday Market Update: A Big Week for Central Banks

Markets experienced a major sell-off on Monday as investors take a cautionary stance ahead of Central Bank policy meetings. Fed and its peers are expected to deliver up to more than 500bps combined. The risk aversion got sparked by the tightening fears as the average G10 policy rate is forecasted to break above 1.8%. There was limited participation on Monday from UK and Japan as Banks observed holidays.

NZDUSD plunged by -0.75% as the dollar strengthened ahead of the FOMC policy meeting. The dollar advanced against the New Zealand dollar as Fed tilts towards a 75bps hike on Wednesday. There is a possibility that the Fed could deliver a better-than-expected hike by 100bps. The pair retracted from a 0.6000 level, a previous support-turned-resistance and the next critical support would be 0.5850, an 18-months low.

EURAUD rallied by +0.33% ahead of Tuesday’s RBA meeting minutes. The Australian dollar weakened after RBA’s Kearns indicated that a rapid increase in its key interest rates would depress the residential and commercial properties. The Euro strengthened after a line-up of ECB members’ speeches and investors shift their focus to ECB President Lagarde’s speech on Tuesday. The pair climbed towards an 11-week high and gains are capped by the 1.5000 resistance. A break above that level could trigger a rally towards the 1.5170 level.

GBPJPY recovered Friday losses by +0.40% as investors took a break from selling to observe Queen Elizabeth II’s Funeral. Traders are bracing for a rate hike by the BoE to 2.25% from 1.75%. The BoE could help lift sentiment on the pound as policy divergence widens against the BoJ. The BoJ is expected to maintain an ultraloose policy stance on Thursday. The pair found near-term support at 163.00 level and bulls could target 164.00 psychological level. However, a break below the near-term support could trigger selling pressure towards the 161.000 level.

European stock futures caught up on Monday’s sell-off as Traders observe the UK holiday. The DAX plunged by -0.77% to a 10-week low at 12600 and a break below that low could trigger fresh selling pressure towards the 12400 level. CAC40 slumped by -1.66% sliding below the 6000 near-term support. The next critical area to watch out for is the 5900 psychological level.

US stock futures are massively sold off as investors remain cautious ahead of the Fed policy meeting. The Tech sector drop weighed the Nasdaq100 futures as higher rates remain a major scarecrow for investors in the near term. The index plunged by -1.14% sustaining a strong bearish outlook and traders should pay close attention to the 11900 resistance level and 11600 support as critical levels.

S&P 500 futures were down -1.12% as bears dominate the trend below the 3900 level and near-term targets could be at the 3800 psychological level. DJIA index lost -1.05% as bulls fail to reclaim the 31000 level and the next key area to watch out for if bears break below the 30500 level is the 30000 psychological figure.

Gold struggled as Fed fears rise ahead of Powell’s decision day. The yellow metal dipped by -0.65% towards a Friday low at the 1655 level as bulls failed to challenge the 1680 near-term barrier. 1655.00 low remains a near-term defence against a fresh 29-months low at 1600.00 psychological level.