“The countdown to the FOMC has started”                 Photo: Pixabay

The clock is ticking.  In less than twenty-one minutes, the wait for the Federal Open Market Committee (FOMC) to release the policy statement and summary of economic projections will be over.  A Fed rate hike of 0.25% to 2.00-2.25% is a given; the chances for such a move are at  94.4%.  Economists expect upward revisions to the 2018 GDP estimates and an upward tweak to the 2018 “dot-plot” forecasts to show four hikes in 2018.

All of the above appears to be priced into the current EURUSD exchange rate.  EURUSD has climbed steadily since September 10, rising from 1.1530 to 1.1812 on September 24.  Since then prices have bounced inside a 1.1740-90 range, and the top of that range is just below resistance in the 1.1820-40 area which has capped EURUSD rallies since May.  

The ECB is on hold until next summer at the earliest, according to Mario Draghi.  The risk of a no-deal Brexit is a valid concern and not a bullish EURUSD scenario.   Rising oil prices are a Eurozone economic risk.  The migrant crisis has not been resolved.  Italy’s new government’s budget may increase spending and raise the ire of the EU.  Contrast those risks with a booming US economy that has full employment and gently rising inflation and showing no ill effects to the recent round of tariffs.  Arguably, risk-reward favours short EURUSD with a stop above 1.1825.   A break below the 1.1730-1.1740 area opens the door to 1.1540.

Chart:  EURUSD daily highlighting support and resistance levels.

Source: Mocaz charts

FX markets stayed close to home with the US dollar opening in Asia today, very close to where it began yesterday.  Sterling is the outlier.  It has managed to rally about 0.47% helped in part by Prime Minister Theresa May ruling out a “snap election” although her government could always lose a non-confidence vote.

President Trump went to the United Nations on Tuesday. He boasted of his administration’s accomplishments, and the delegates laughed.  He then proceeded to reiterate his “America First” saying he rejects the ideology of globalism.  His remarks had zero impact on FX trading.

NZDUSD will be in the spotlight in Asia.  New Zealand releases trade data, business outlook survey and business confidence data.  The trade deficit is expected to widen to -$930 mil due to seasonal factors.  Business Confidence has been sliding due to the US/China trade dispute.  That dispute has worsened suggesting Business Confidence will be soft and undermine NZDUSD.  NZDUSD is in a minor uptrend from September 10 while prices are above 0.6640.  A decisive break below 0.6620 would extend losses to 0.6570.   A move above 0.6660 targets 0.6690.

Chart:  NZDUSD hourly

Source:  Mocaz charts