This article is originally referred from IronFX Intraday Analysis.
• The dollar traded higher or unchanged against most of its G10 counterparts during the European morning Wednesday. It was higher against CHF, NOK, SEK and GBP in that order, while it remained virtually unchanged against EUR, CAD and AUD. The greenback was lower only versus JPY and NZD.
• Market participants remain focused on the FOMC policy meeting later in the day, where the Committee is widely expected to keep interest rates unchanged. There is no press conference or updated economic forecasts accompanying this meeting, so all the action will come from the statement, which we expect to reflect a more hawkish bias than the one in June. US data have been robust, suggesting a pick-up in Q2 growth, while markets have responded to “Brexit” in an encouragingly resilient manner. Although the Committee’s general message is likely to be that it’s on hold while it monitors the potential “Brexit” impact on the US economy, a more optimistic tone could bring forward market expectations for the next rate hike and could prove USD-positive.
• The British economy picked up steam in Q2, according to the 1st estimate of Q2 GDP. The nation’s GDP growth rate rose to +0.6% qoq, surpassing expectations of remaining unchanged at +0.4% qoq. The British pound was little changed on these encouraging data, perhaps because the pre-referendum performance of the economy may not be reflective of its current state. In any case, considering that that the 1st estimate of GDP is produced using less than half of the total data for the quarter, we will likely have to wait for the second estimate in order to safely conclude whether referendum-related uncertainties weighed on economic growth.
• USD/CAD traded higher during the European morning Wednesday after it hit support at the 1.3160 (S1) line. Given that the pair has been trading within an upside channel since the 15th of July, I would consider the short-term picture to be positive. I would expect the bulls to maintain their momentum and perhaps aim for the 1.3245 (R1) resistance zone soon. A clear break above that zone would confirm a forthcoming higher high and may open the way for the next resistance obstacle of 1.3300 (R2). An optimistic Fed statement today could prove the trigger for the bulls to take action again, at least for a test near 1.3245 (R1). Switching to the daily chart, I see that the rate was trading within a triangle formation from the beginnings of April until the 22nd of July, when the rate exited the pattern to the upside. In my view this has turned the medium-term outlook to the upside as well.
• Support: 1.3160 (S1), 1.3120 (S2), 1.3075 (S3)
• Resistance: 1.3245 (R1), 1.3300 (R2), 1.3400 (R3)
Original Source: IronFX Intraday Analysis