The Bullet Report: USD stronger ahead of FOMC

Although the financial calendar is rather empty today, with only German IFO being a market mover, this week is very important in terms of data releases. FOMC is meeting on Wednesday while the Bank of Japan meets on Friday. There is very little chance for Fed to hike interest rate this time. But markets will be keen to scrutinize the statement on whether Fed is now comfortable to move in September. There are also a number of key economic data to be released this week. In particular, UK, US and Eurozone will release Q2 GDP. Eurozone and Japan will release CPI. Also, Australia CPI will be crucial to determine whether RBA will cut interest rate in August.

Currencies: EURUSD started the brand-new trading week around 1.0970, little changed from Friday’s close. EURUSD came under tension as Tokyo opened and it declined to 1.0950, but managed to bounce from there and is currently back at 1.0970. GBPUSD opened at 1.3145, roughly 35 pips higher from Friday’s close, but failed to sustain momentum and eventually fell back to 1.3110 to close the weekend gap. It then consolidated between 1.3110 and 1.3135 for the rest of the session. USDJPY started the day at 106.20 and slowly rose towards 106.70, but was sold to 106 at time of writing. Support is seen at 105.80 and 105.50.

Stocks: Asian shares held near nine-month highs on Monday as assurance from policymakers on the need to boost growth suppressed worries over the impact of Britain’s Brexit vote while the USD, buoyed by solid U.S. economic data, stayed firm. Japan’s Nikkei  was flat. The Bank of Japan is widely expected to ease policy further at a policy review ending on Friday while Japanese Prime Minister Shinzo Abe has actually ordered fiscal stimulus.

Oil and Gold: Oil prices hovered near 2.5 month lows after having lost about 4% last week on renewed worries about a global crude glut. Brent crude futures traded at $45.66 per barrel, down 0.1 % and near Friday’s low of $45.17, its lowest since May 11. Gold has actually broken trend line support $1322 and declined till $1313.47. It is currently trading around $1317.70. On the lower side, any break below $1322 confirms minor weakness, a decline to $1310/$1305 is possible.

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