Market is waiting for the FOMC today about the interest rate
The Dollar eased as traders adjusted their positions ahead of today’s Fed rate meeting outcome. The Fed is expected to announce a tapering of its US$ 4.5 trillion balance sheet as well as offer clues on future policy. Sterling see-sawed on a report that UK foreign minister Boris Johnson would resign if his Brexit demands weren’t met. The Pound closed modestly higher against the Greenback.
US President Trump addressed the United Nations General Assembly issuing warnings to North Korea and Iran.
Australian House Prices rose 1.9% against a forecast rise of 1.2%.
German ZEW Economic Sentiment Index climbed to 17.0, higher than the 12.3 forecast
Euro Zone ZEW Economic Sentiment Index: 31.7 against a forecast 32.4
Canadian Manufacturing Sales missed with a print of -2.6% versus a forecast of -1.7%
US Building Permits rose to 1.3 million units against an expected 1.22 million units
US Housing Starts printed at 1.18 million units against a forecast 1.17 million units
Wall Street extended its gains with the US DOW closing up 0.2%.
USD/DXY – closed 0.21% lower to 91.83 from 92.016 yesterday
EUR/USD – climbs to 1.1995 at the close (1.1958 yesterday)
USD/JPY – little-changed, finishing at 111.61 from 111.56 yesterday.
GBP/USD – modestly higher in choppy trade to end at 1.3522 (1.3502 yesterday)
AUD/USD – closes up 0.7% at 0.8009 from 0.7964 yesterday buoyed by strong metals and domestic house prices.
Outlook: The Fed is expected to leave rates on hold at its meeting today as well as announce the start of its balance sheet reduction. Markets are expecting the taper to be very slow and very gradual. Most participants are not expecting any concrete clues from the Fed which would point to a December rate hike.
Upcoming data and events releases today:
Japan Seasonally Adjusted Merchandise Trade Balance: (GMT 11.50 pm, Sept 19/Local Time 9.50 am, Sept 20) forecast surplus of JPY 404.7 billion from the previous JPY 337.4 billion surplus
UK Retail Sales: (GMT 8.30 am, Sept 20/Local Time 6.30 pm, Sept 20) forecast: 0.2% from 0.3%
US Existing Home Sales: (GMT 2 pm, Sept 20/Local Time 12 am, Sept 21) forecast: 5.46 million from previous 5.44 million
US FOMC Economic Projections, Statement, and Fed Funds rate: (GMT 6.00 pm, Feb 20/Local Time 4.00 am Feb 21) forecast: Fed Funds rate 1.25% from previous 1.25% (no change)
US FOMC Press Conference: (GMT 6.30 pm, Feb 20/Local Time: 4.30 am, Feb 21)
Trading View: Yesterday’s price action suggests that traders still prefer to sell the US Dollar, which has been the path of least resistance. The last round of Fed speakers was also on the dovish side. Speculative market positioning is Dollar short with some currencies still at multi-month records.
The risk then, for me, is a surprise. US bond yields have risen steadily a little over a week ago when the benchmark Ten year yield touched close to 2.0%. Last night it closed at 2.24% Perhaps we FX traders should listen to the bond guys.
Let’s not forget what is happening around the world too. There is a risk of greater political uncertainty in Europe, the UK and many parts of the world.
EUR/USD – The trading range for the Euro last night was 1.1948-1.2006 with the Single currency closing up 0.27% at 1.1995. A rise in the German ZEW Economic Sentiment Index was offset by a fall in the Euro Zone economic sentiment index. The market is content holding on too long Euro positions and is still expecting a higher Euro in spite of recent ECB warnings. The German parliamentary elections are coming up this weekend. Speculative Euro longs remain at multi year highs. EUR/USD has immediate resistance at 1.2005/10 and then at 1.2030. Immediate support can be found at 1.1980 and then at 1.1960. Likely range 1.1960-1.2010. Sell rallies.
USD/JPY – closed little-changed ahead of the BOJ meeting which is tomorrow afternoon in Asia. The yield on the US Ten year bond closed up at 2.24% (2.23% yesterday). Japanese Ten year yields were unchanged. This should keep the US Dollar supported, however, the speculative trading market is short JPY. USD/JPY has immediate resistance at 111.90 (overnight high was 111.879) and at 112.10. Short term support lies at 111.30 and 111.10. Likely range today 111.30-111.80.
GBP/USD – had a choppy trading session yesterday between 1.3469 and 1.3552. Given the uncertain outcome of Brexit negotiations and the political uncertainty in the UK, the Pound’s topside should be limited. However, UK rates continue to rise. The yield on the Ten years UK Gilt rose another 3 basis points to 1.33%, up from 1.23% earlier this week. Sterling has immediate resistance at 1.3530 and then 1.3550. Short term support lies at 1.3500 and 1.3480. Likely range 1.3485-1.3525.
AUD/USD – finished higher on the back of a generally weaker US Dollar as well as strong base metals prices. The RBA was relatively upbeat in its economic assessment, yesterday’s RBA meeting minutes revealed. The Australian central bank expects strong employment growth to continue. The Australian House Price Index rose 1.9% in the last quarter, more than the expected rise of 1.2%. AUD/USD has traded pretty much in a tight range. Tomorrow’s Fed outcome may give us fresh direction. AUD/USD has immediate resistance at 0.8020 (overnight high 0.80198). Immediate support can be found at 0.7990 and then 0.7960. Likely range 0.7975-0.8025. Prefer to sell rallies.
Now is your chance to make a profit!
Open an account here!
***Information contained in this newsletter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making, but merely provides information from the market for its clients as additional information is made available as per the events occurring in the financial markets.
HIGH RISK WARNING:
Trading Foreign Exchange (Forex) and Contracts for Differences (CFD’s) is highly speculative, carries a high level of risk and may not be suitable for all investors. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin.
© Copyright 2015 – CM Trading – All rights reserved