- Another positive lead from Wall Street saw the Nasdaq and S&P500 close 1.4% and 0.5% higher respectively. The tailwind comes from expectations that the Fed to remain accommodative in today’s meeting and Trump’s effective endorsement of the Oracle-ByteDance purchase of TikTok.
- Nearly 25% of US oil production and export ports were closed as hurricane Sally approached the Gulf Coast, causing Brent and WTI to rally nearly 3% from their multi-week lows.
- The US dollar lost notable ground against JPY and CNH, with USD/JPY falling to a 2-week low and USD/CNH falling to its lowest level since April 2019.
FOMC Meeting (04:00 Sydney on Thursday)
- We can expect volatility to remain low ahead of the Fed’s first meeting after implementing their AIT policy (average inflation targeting). However, the Fed Funds Futures are implying 0% of any change in the interest rate.
- Whilst there is no expectation of a change, traders are hesitant to commit to positions ahead of the meeting in case more information is divulged about how they will now approach their new flexible inflation targeting.
- CPI data for UK and Canada puts GBP and CAD pairs onto the radar, but we wouldn’t expect large moves to occur until after the FOMC meeting.
Trading the USD with the intention of holding positions through the FOMC meeting may carry extra risk due to potential volatility around the event.
Technically, USD/CHF and USD/CAD look interesting for potential long positions and GBP/USD a potential short, but we will reassess tomorrow after the FOMC meeting.
EUR/JPY: Break Below 124.29 Confirms a Top
- After a strong bullish trend, price action has broken its trendline and shows the potential for a topping pattern to form at the highs.
- A break below 124.30 confirms the reversal pattern and projects an initial target around 121.80
- However, if 124.30 holds as support it could provide a near-term opportunity for bullish setups in line with the dominant trend.
GBP/JPY: Consolidation at the Lows
- Prices remain in a strong downtrend and price action has consolidated enough for us to reconsider short positions if it breaks lower.
- However, range-trading strategies can be considered between 135.35 – 136.62 whilst these levels continue to hold as support and resistance. (This is where bulls would buy around support and bears would short around the highs of the range).
- A break below 135.35 assumes bearish trend continuation and brings 134.00 into focus. A break above 136.62 assumes a deeper correction against the bearish trend.
FTSE 100 (UK100): Trending Its Way into Resistance
- The weekly chart (not pictured) shows that a potential for a multi-week bull flag is forming. However, its hard to be bullish on the UK economy right now and, until the flag breaks, the bearish channel looks appealing to bears on lower timeframes.
- The H4 chart shows price action is bouncing higher along the 10-20 eMA’s. Bulls can seek to buy dips if price action retraces towards the averages and target the upper channel.
- However, bears can then look for weakness to potentially swing trade the FTSE lower within the channel. Obviously, this becomes invalidate with a break above the channel.
USD/JPY: The bearish breakout worked out well and prices tested the upper bounce of the support zone highlighted yesterday. For now, we’d prefer to step aside ahead of the FOMC meeting.
USD/CNH: The trend continued lower and yesterday’s low stalled at the support zone highlighted yesterday.
Gold: Bias remains bullish above 1936.89. We continue to wait for a break above the sloping resistance level.
CHF/JPY: Price broke beneath Thursday’s hammer low and now appears set to test the prior swing low and (hopefully) continue its downtrend.
Brent: Prices have bounced higher from key support. Bears can look for evidence of a corrective high before considering shorts.
CAD/CHF: Waiting for retracement higher to fade into.
EUR/CAD: Dip buyers may be interested in a retracement towards 1.5520. Breakout traders could consider a break above (1.5660) and target the highs around 1.5430.
NZD/CHF: Bias remains bullish above 0.6043.