Morning Report: Markets Braced For FOMC

Key Data Release Today

0930GMT – GBP Consumer Credit exp £0.80B v £0.898B
0930GMT – GBP M4 Money Supply exp 0.5% v 0.3%
0930GMT – GBP Mortgage Approvals exp 62.250k v 64.212k
0930GMT – GBP Net Lending to Individuals £2.8B v £3.2B
1100GMT – USD MBA Mortgage Applications 11.6%
1800GMT – USD FED Interest Rate Decision 0.25% v 0.25%
1800GMT – USD FED Policy Statement
1800GMT – USD FED Pace of MBS Purchase Program $5B
1800GMT – USD FED Pace of Treasury Purchase Program $10B
2015GMT – CAD BOC Govenor Poloz Speech


Overview:

  • USD under pressure on the back of weak Durable Goods data. Risk sentiment buoyed by surge in US Consumer sentiment . Markets await FOMC and GDP.
  • CAD strengthens during the US session. This week’s domestic highlight is GDP on Friday with one eye on Governor Poloz speech tomorrow evening..
  • EUR continues to correct higher supported by the continued pullback in US econ data
  • GBP tests higher ahead of domestic data
  • JPY weaker on risk on response to softer US figures. Market awaits BoJ.
  • AUD trades higher in line with other dollar crosses but still contained by recent range. FOMC to decide range break or hold.

Key Trades

USDCAD: Neutral – Revised (Longs closed)
EURUSD: Bearish – No Change
GBPUSD: Bearish – No Change
USDJPY: Bullish – No Change
AUDUSD: Neutral – Revised (Longs closed)

Analysis

EURUSD: Bearish – No Change

  • Shorts are still open from last week but with price holding on a retest of Wednesday Oct 15th bull candle low, stops have been moved to breakeven.
  • Looking for the high of last Wednesday’s bearish candle to act as resistance for continuation to the NFP lows.
  • Order Book Regression has crossed to the upside here and unless we see a sharp reversal lower today, it’s likely we grind higher here and stops get triggered.

Euro continues to correct higher as USD pulls back on a continuation of recent US data misses. The key driver for the next phase of Euro price action will be the FOMC decision and statement.

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USDCAD: Neutral – Revised (Longs closed)

  • Longs held from last week were closed out for a small loss on Yesterday’s bearish close below trendline and weekly lows.
  • Order Flow Indicators have crossed to downside here ahead of FOMC 

CAD displays some short term strength as USD corrects on weaker data ahead of the FOMC  and oil rallies off the lows amidst firmer growth outlook.

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GBPUSD: Bearish – No Change

  • Still holding shorts from last week
  • Price failed to break lower as anticipated and is currently holding against the descending trendline from summer highs with resistance just above at last week’s high.
  • Although Order Flow indicators have crossed to the downside here, price has clearly rejected last week’s high for now.
  • Will exit shorts on a close above last week’s high.

GBP trades up and continues to test higher levels in the current range. Domestic data this morning will be key for continued test higher, a meaningful range break likely only driven by the FOMC releases later in the day

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AUDUSD: Neutral – Revised (shorts closed)

  • Exited shorts from last week as price has closed above the pin bar entered on and also the upper line of the contracting triangle formation.
  • Order Flow indicators have crossed to the upside here signalling strength but price still below the consolidation high

Aussie moves higher in unison with the other major dollar crosses The past four weeks range continues to hold while the FOMC on Wednesday is the likely catalyst for new direction potential range break or pull back.

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USDJPY: Bullish – No Change

  • Still holding longs from the rebound off the mid 105 breakout area retest.
  • Positions increased on break higher last week and will be looking for a retest of that level to act as support for continued upside this week
  • Order Flow indicators have crossed to the downside here though On Balance Volume remains at highs.

JPY remains pressured driven by a risk on sentiment response to the surge in US Consumer Sentiment data. While the weaker durable goods data and the recent string of US econ data misses will keep the FED penned in with respect to rates.

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