Markets only barely majority pricing in a 0.25% Fed rate cut this evening
Big volatility set to effect USD and risk related currencies as markets only just expect the central bank to reduce rates by 0.25%.
EUR/USD: Euro outperforms ahead of Fed event this evening
It's a big day for USD related pairs, and this one's no exception with the Federal Reserve's Open Market Committee set to announce its monetary policy whereby markets are only just majority pricing in a 0.25% rate cut given increased trade risks, political pressure, and data that hasn't necessarily impressed as of late. However, inflationary pressures as oil prices have yet to fully retrace could factor into future CPI readings should the higher prices persist or worse still, escalate. From a technical standpoint most of the main technical indicators remain neutral but with long-term negative bias persisting, and the Fed's decision is set to break pivot points with greater ease and entice contrarian volatile breakout strategies instead. Going into this evening's event retail traders are majority long at 56% while institutional bias is unchanged at an exact opposite majority short 56%.
GBP/USD: Pound’s second-best performance keeps the pair’s price close to fresh highs
Positive technical bias has managed to form in this pair's price given it has been able to lift itself off the lows as the likelihood of a no-deal Brexit falls, with the pound the second-best performer amongst the FX majors after the euro. However, it's been ongoing uncertainty with most intraday movement relatively limiting on the GBP side (last Friday's report aside). We’ve got bigger fundamental items on the economic calendar, meaning it’s time to shelve technicals whose pivot points are less likely to hold in a low-liquid environment. UK CPI figures will be released, then the Fed's announcement in the evening effecting USD-related pairs, and followed by tomorrow's BoE announcement. Going into these market-moving events retail traders are majority long at 61% while institutional bias is a heavy short 77%.
USD/JPY: Both Fed and BoJ in potential consecutive easing action
As with GBP/USD, we've got central bank announcements from the currencies of both countries of this pair. Though unlike the pound, the yen is set to be more effected by this evening's Fed announcement given its safe haven underlying that would falter in a risk-on theme and outperform should investors go risk-off. The BoJ will be under pressure tomorrow to introduce further easing should the Fed decide to reduce rates and not part of a 'midcycle adjustment', officially ending a policy of divergence not just in action but in planning as well. While the overview is positive from a technical standpoint, it’s less relevant ahead of the fundamental event that will likely show breakout strategies being more ideal. In terms of positioning, retail and institutional bias are holding opposite bias with the former at a slight 51% majority long and the latter at a heavy short 70%.
USD/CAD: Canadian dollar underperforms as energy prices plummet
Yesterday's energy prices continued to infuse the energy commodity currency CAD with increased volatility, and as a result the pair's movement has been more erratic. With traders looking to energy prior to initiating a trade, that means that tonight's EIA release will also be important as it will be released after Canadian CPI figures, but before the big Fed announcement. All the pair's main technical indicators are neutral, and as a result it’s a consolidatory technical outlook whose underlying is volatile and giving preference to conformist breakout strategies as opposed to contrarian reversals. Both retail and institutional traders are on the same side of the fence going into tonight's event, majority short at 61% and 56% respectively.
AUD/USD: Recovering off the lows ahead of the Fed’s decision and tier 1 data
RBA minutes yesterday took the Australian dollar lower earlier in the session and testing its initializing but stalling bull trend technical overview. By the end of the session however, it managed to recover as the US dollar weakened. Big items are in store for this pair, with its USD aspect at the mercy of the Fed's decision tonight, and the AUD fundamental aspect focusing on Australian employment figures, its proxy aspect on whether US President Trump will impose more tariffs on China following the event as he did last time to put more pressure on the central bank, and its high-beta nature should a risk-on scenario be in play. Retail bias is close to the middle at a slight majority long 54%, while institutional bias is heavy short 71% anticipating further USD gains.
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