The USD revs ahead of both the long awaited CPI and FOMC meetings minute release today. This has been an event most if not all market participants have been waiting for which may paint a clearer picture to what may become of the potential rate hike this year. The current predictions for the CPI hold at 0.2%, a figure below this may weaken the USD considerably as inflation targets, an attribute needed to promote an interest rate hike will not have been fulfilled. In regards to the FOMC statement, the sentiment still points to a hawkish tone simply because it pre-dates the China events and latest payrolls. These releases come as two parts of a puzzle, with both combined helping market participants shape up the expectations of a September hike.
As the USD still remains fundamentally bullish, most other currency pairs and commodities remain bearish due to either the events of China or pressure served from the falling prices of Gold and Oil. Other than the key releases today for the USD, markets remain relatively quiet with the lingering events of the previous trading week causing the markets to either trend or range. In the commodity arena, Gold has found some stability post-Yuan devaluation but this stability may hit disequilibrium before the end of today.
At 1:30 pm CPI was released with results below the 0.2% target, the USD weakened across the board as fears mounted about the postponement of a hike this September. If the FOMC meeting minutes released this evening has even the slightest touch of doves, Gold may regain some bullish momentum breaking above the 1126 level of resistance. If Gold goes up then the USD Dollar index will most probably trade to the downside moving closer to the 11950 support. Of course, this will translate to the AUDUSD taking a slight leap to the upside to challenge the 0.7400 level once more. This domino effect extends to the AUD strengthening against the GBP which may send GBPAUD bears back below the 2.140 resistance. Currency correlation can be a very powerful tool.
Sentiment still remains bullish on the USD, but the question is for how long? It all started with NFP not hitting expectations last month. There was still some influx of positive news releases from the States, but the first week of August did end somewhat anti-climatic. With CPI figures printing below the predicted value of 0.2%, would today's FOMC minutes be the last attribute needed cause a relevant change in USD sentiment? Time will tell.
The EURUSD remains in a period of consolidation pre FOMC release. CPI figures just printed negative which should have weakened the USD. The charts show an inverse mirror image with the USD gaining against the EUR. This current daily candle is looking very bearish and a close below the 1.100 level may open a further path back to 1.0850. Technical leading and lagging indicators also suggest that a move below the 1.100 level will reimburse bearish sentiment on the EURUSD daily timeframe. Prices currently trade below the 20 SMA and the MACD trades to the downside.
US Dollar index spiked down slightly due to the negative CPI release of 0.1%. Prices have found some support above the weekly and daily pivot. The US Dollar index is consolidating because technical leading and lagging indicators are giving mixed signals. The MACD trades to the downside and prices are below the daily 20 SMA. It looks like the FOMC meeting minutes which will be released later today may serve some volatility. Key support may be found at 11950 and resistance at 12050.
This pair has been in a solid range for the past trading months. Support at 1.5500 and resistance at 1.5650. Leading and lagging indicators are suggesting that prices may trade to the upside, but a solid daily close above the 1.5650 resistance may signal for a further move to the monthly R1 of 1.5700. A move back within the range invalidates this daily bullish outlook.
USDJPY remains technically flat. Support can be found at 124.0 and resistance can be found around the 125.0 regions. A solid break will be required before the trend can resume. The news release this evening which is USD focused may serve volatility to this pair.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.