Markets take a wait-and-see attitude with the Fed meeting looming
The trading session on Monday, the 18th of September, went by smoothly. The value of the US dollar index hardly changed, moving in a range of 91.78 to 92.22. The euro index (ECX) closed slightly up, jumping from 94.71 to 95.10. This growth on the ECX was brought about by growth on the euro against the British pound, Japanese yen, and Swiss franc. The market is clearly in wait-and-see mode as the Fed meeting approaches.
Today, at 04:30 (GMT+3), the minutes of the RBA’s latest meeting were published. The regulator believes that the Australian economy is on a relatively stable path to growth, although the “expensive” dollar could have a negative effect on the economy and limit its growth. The RBA continues to assert that the country’s economy would be better if the Aussie dollar exchange rate underwent a correction.
Day’s news (GMT+3):
- 04:30 Australia: RBA meeting’s minutes.
- 12:00 Germany: ZEW survey – economic sentiment (Sep).
- 15:30 USA: building permits change (Aug), housing starts (Aug).
- 16:00 New Zealand: GDT price index.
Today marks the beginning of the Fed’s two-day meeting. BNP Paribas and Wells Fargo are expecting the regulator to maintain the key rate at its current level of 1.00% – 1.25%, but also that it will announce the start of its efforts to normalise its balance sheet. According to FedWatch, markets have factored in zero probability of a rate hike tomorrow, while this probability for the meeting on the 13th of December is 57%.
On the 4-hour timeframe, the EURUSD pair is trying to restore the upwards trend:
On the hourly timeframe, it seems that the correction has ended:
On the hourly timeframe, the EURUSD pair is trying to break through the level of the “key top” of the correctional movement at 1.1990. If the price breaks through here, it will most likely continue to the upper boundary of the range; at around 1.2070 (scenario 1). However, if this “key top” isn’t renewed, the EURUSD pair could, in anticipation of the Fed meeting, test the lower boundary of the range at 1.1850 (scenario 2).
At the time of writing, the EURUSD pair is trading at 1.1993.
On the 4-hour timeframe, the GBPUSD pair is continuing to move in an upwards trend:
Yesterday, the GBPUSD pair corrected from 1.3610 to 1.3462 after touching the resistance. Today, the pair will make a second attempt to test the resistance line, that is, it will rise to 1.3610 again. In my opinion, today we’ll see a positive correlation between the EURUSD and GBPUSD pairs, with the British pound most likely copying the movements of the euro against the dollar.
At the time of writing, the GBPUSD pair is trading at 1.3534.
On the 4-hour timeframe, the USDJPY is trying to push above the middle of our potential range, which runs from 108.00 to 114.50:
Now, the USDJPY pair is trading at 111.77, which is in between the 50% and 61.8% Fibonacci levels. Yesterday, I wrote that I would consider a long position on this instrument if the Fed decides against tightening monetary policy. I’ll be looking for an entry point on the hourly timeframe:
If the USDJPY pair tests 111.10 level and we see growth resume, that’s when I’ll buy.
I’d like to remind you once again that personally, I’m going to refrain from trading on the dollar until after the meeting.