It has been a tense and eventful week for markets thus far as investors brace for key risk events while keeping an eye on the developments surrounding China Evergrande Group.
Despite the cautious sentiment, global equity bulls have stood their ground with stocks in Europe rising for a second day while U.S futures are green. There was little action in the FX markets today as the dollar remained on standby ahead of the heavily anticipated Federal Reserve meeting this evening.
Spotlight shines on the dollar as Fed looms
The major risk event for king dollar will be the Federal Reserve policy meeting.
Markets widely expect the central bank to leave interest rates unchanged. However, all eyes will be on the “dot plot”, economic projections and Jerome Powell’s press conference. Any hints on the taper plans, major changes to the economic forecasts, or “dot plot” could inject the dollar with fresh volatility.
Looking at the technical picture, the DXY remains in a wide range on the weekly charts but seems to be pushing higher on the daily timeframe.
Bulls remain in a position of power if 92.00 proves to be reliable support. A breakout above 93.44 could open the doors towards 93.72 and 94.00. Should prices slip below 92.00, the next key level of interest can be found at 92.40.
Euro wobbles above 1.17
It has been a sluggish and slightly depressing session for the Euro which has weakened against almost every single G10 currency today.
The EURUSD remains under pressure on the daily charts with prices flirting dangerously close to 1.17. Should this level prove to be unreliable support, a decline back towards 1.166 and 1.160 could be on the cards.
Alternatively, a breakout above 1.18 which is also where the 50 SMA resides, could swing open the doors towards 1.19.
USDJPY remains choppy as ever
As jitters around the China Evergrande drama eased, the Japanese Yen found itself in the direct firing line. It has weakened against every single G10 currency today with the USDJPY trading back above 109.50 as of writing. While further upside could be on the cards, the currency pair is likely to be influenced by the Federal Reserve meeting.
In the meantime, a strong move above 109.70 could inspire an incline towards 110.30. If prices end up slipping back below 109.10, expect the USDJPY to test 108.70.
AUD lower lows and lower highs
The AUDUSD remains bearish on the daily charts. Prices are approaching the 0.7200 support level. A breakdown below this point could encourage bears to target 0.7130. For bulls to jump back into the game, a solid daily close above 0.7300 needs to be secured – which could trigger a move higher towards 0.7380.
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