General market theme
The price action in the majors has been choppy over the past 24 hours as investors were looking to reposition themselves ahead of today’s Fed meeting on monetary policy.
We’ve mentioned many times that we don’t expect any changes in the rate policy at this time, but we’re rather focused on the forward guidance that will come out of the meeting, with expectations set for a bullish tone that should support the dollar.
The domestic economy in the US has performed nicely while navigating through the recent Brexit volatility, while showing good progress across the board. Should expectations be met, the dollar would enjoy a fresh round of support with the likes of the euro and the pound dropping to fresh lows as we move into the next month.
Price action highlights
The euro spiked briefly to the upside yesterday and reached the 1.1030 level, but the rally was short-lived and the rest of the day the currency looked to the downside. This morning the single currency is fighting to climb back above the 1.1000 figure, but the sentiment is mainly bearish as investors are looking for the dollar to come out as a winner from the Fed meeting this evening.
Since we don’t expect anything too important from this event, we believe that the euro is very likely to retest its recent lows, with a possible extension below them should the Fed sound overly optimistic about the short-term outlook of its economy.
The cable was rather choppy in its price action yesterday, and even though it attempted to break out of its sideways pattern it eventually ended the day trading on either side of the 1.3100 area. The bias is bearish of course ahead of the Fed meeting, and with the pound on the defensive we could see fresh lows today as a positive message from the US central bank could send the UK currency below the 1.3000 level again.
Focus of the day
The Fed meeting on monetary policy is the most important event of the day, however earlier than that we will have the opportunity to find out how the GDP levels are doing in the UK and whether the recent uptick in the US economy has helped the Durable Goods Orders rebound this month. We expect limited reaction to these reports as investors will be focused on the FOMC meeting later in the evening.
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