The Dollar traded slightly higher on Tuesday despite the worse than expected housing market figures as all eyes are turned on both the FED and Bank of Japan rate decisions tomorrow.
Looking at the U.S economic releases that came out today, Housing starts fell to 1142K in August down from 1212K previously while the Building permits MoM retreated by -0.4% against forecasts of 1.8%.
In the meantime, the probability of a rate hike tomorrow dropped to 22% only which means that traders are not expecting a hike during this meeting but maybe by the end of this year.
Technically, the Dollar remain steady despite weak data from the U.S today.
The Greenback hover around 96.00 psychological barrier after prices jumped by the end of last week. Prices succeeded to break above 95.45 short-term resistance, which cleared the path for a re-test of 96.00 psychological barrier followed by 96.25 in extension. In the meantime, the Dollar index broke above the bearish trend line that comes from 97.60 peak reinforcing the bullish outlook in the near-term. As of now, it is clear that market participants are pricing on a rate hike in the coming months, meanwhile, any dovish comments from FED officials can trigger a big sell-off in USD, especially if a clear message that rates may not move until next year is stated.
In the flipside, only a daily close below 94.90 support will put the Dollar under pressure again.
Regarding the British pound recent price action, the pair traded in line with our expectations as we have seen a breakdown below 1.3000 psychological support, which reinforce the negative outlook in cable. As of now, the pair is likely to extend the decline in the direction of 1.2935 support before to see new buyers. In the opposite, any move higher should be considered as corrective only, and we can see strong rejection around 1.3020 level for another dip in the coming days.
The Euro continue to trade sideways to lower in the near-term, prices jumped earlier this morning to reach as high as 1.1213 before to retreat lower.
Looking at the biggest picture, we believe that the pair is set for further decline, especially if 1.1235 hourly resistance remain intact. Therefore, a move lower towards 1.1125 area is likely followed by 1.1045 major support.
This view remains valid as far as prices keep trading below 1.1285 peak and only a daily close above this level, will cancel this negative scenario.