Market Brief
The FX traders remain on the sidelines before the Fed policy announcement today and the Scottish independence referendum tomorrow.
The FOMC is expected to reduce its monthly asset purchases by additional 10 billion dollars and continue purchasing 10bn dollar treasury and 5bn dollar MBS monthly. As we approach the end of the asset purchases program, the jitters on the timing of the first Fed rate hike escalate. Despite FOMC Chair Yellen’s former warnings that the Fed will keep interest rates at low levels for “considerable time” after the end of the QE, the hawkish expectations drive the markets pre-FOMC decision. Traders continue favoring the USD-buy side. Markets are positioned for a hawkish shift in Fed’s forward guidance, thus leaving room for disappointment later today. More-balanced-than-expected Fed stance may trigger some short-run frustration for USD-hawks. We stand ready for rectification in USD and US yields.
EUR/USD advanced to 1.2995 as some traders shift to more balanced positions in US session yesterday, considering the risk of a softer Fed tone. Up trending US yields kept EUR/USD offered pre-1.3000. We expect consolidation pre-Fed. A dovish FOMC stance should power the EUR-bulls back towards 1.3110-50, pre- September 4th ECB meeting levels.
In UK, the tensions on Scottish vote continue. Scotland will vote tomorrow to decide whether to stay in the UK or to leave. The uncertainties persist as the poll results are tight. The economic and political implications of Scottish independence are very important. GBP/USD tests offers at 1.6300+, option bids trail above this level especially to take advantage from a potential post-Fed rally later in the day. Upside attempts should however remain vulnerable. We shall see the clear short (and even long)-term direction as the Scottish situation gets more clarity. In the morning, the BoE will release meeting minutes; we expect little price action as the focus remains on Scotland.
EUR/GBP trades in the tight range of 0.79483/697. Trend and momentum indicators are perfectly flat. A close above 0.79650/75 (21-dma & MACD pivot) should keep the bias on the upside.
There is a morning start formation on the AUD/USD daily chart. Our candle pattern monitor qualifies the formation as high conviction given the low trading levels over the past two sessions. The technical picture suggests a short-term bullish reversal, yet the Fed will likely say the last word. Key resistance is seen at 0.9182/0.9200 (200-dma & optionality).
The economic calendar of the day: UK August Claimant Count Rate and Jobless Claims Change, UK July Unemployment Rate (3-months) and Average Weekly Earnings, Italian July Trade Balance, Euro-Zone July (Final) CPI m/m & y/y, Credit Suisse ZEW Survey on September Expectations in Switzerland, US September 12th MBA Mortgage Applications, US August CPI m/m & y/y, US 2Q Current Account Balance, US September NAHB Housing Market Index.
| Todays Calender | Estimates | Previous | Country / GMT |
| EC Aug EU27 New Car Registrations | - | - | EUR / 6:00 AM |
| IT Jul Trade Balance Total | - | - | EUR / 8:00 AM |
| IT Jul Trade Balance EU | - | - | EUR / 8:00 AM |
| UK Bank of England Minutes | - | - | GBP / 8:30 AM |
| UK Aug Claimant Count Rate | 2.90% | 3.00% | GBP / 8:30 AM |
| UK Aug Jobless Claims Change | -30.0K | -33.6K | GBP / 8:30 AM |
| UK Jul Average Weekly Earnings 3M/YoY | 0.50% | -0.20% | GBP / 8:30 AM |
| UK Jul Weekly Earnings ex Bonus 3M/YoY | 0.70% | 0.60% | GBP / 8:30 AM |
| UK Jul ILO Unemployment Rate 3Mths | 6.30% | 6.40% | GBP / 8:30 AM |
| UK Jul Employment Change 3M/3M | 120K | 167K | GBP / 8:30 AM |
| UK Bank of England Releases Minutes of Interest Rate Decision | - | - | GBP / 8:30 AM |
| EC Jul Construction Output MoM | - | -0.70% | EUR / 9:00 AM |
| EC Jul Construction Output YoY | - | -2.30% | EUR / 9:00 AM |
| EC Aug CPI MoM | 0.10% | -0.70% | EUR / 9:00 AM |
| EC Aug F CPI YoY | 0.30% | 0.30% | EUR / 9:00 AM |
| EC Aug F CPI Core YoY | 0.90% | 0.90% | EUR / 9:00 AM |
| SZ Sep Credit Suisse ZEW Survey Expectations | - | 2.5 | CHF / 9:00 AM |
| US Sep 12th MBA Mortgage Applications | - | -7.20% | USD / 11:00 AM |
| US Aug CPI MoM | 0.00% | 0.10% | USD / 12:30 PM |
| US Aug CPI Ex Food and Energy MoM | 0.20% | 0.10% | USD / 12:30 PM |
| US Aug CPI YoY | 1.90% | 2.00% | USD / 12:30 PM |
| US Aug CPI Ex Food and Energy YoY | 1.90% | 1.90% | USD / 12:30 PM |
| US Aug CPI Core Index SA | 238.597 | 238.311 | USD / 12:30 PM |
| US Aug CPI Index NSA | 238.26 | 238.25 | USD / 12:30 PM |
| US 2Q Current Account Balance | -$113.4B | -$111.2B | USD / 12:30 PM |
| US Sep NAHB Housing Market Index | 56 | 55 | USD / 2:00 PM |
| Fed QE3 Pace | $15B | $25B | USD / 6:00 PM |
| Fed Pace of Treasury Pur | $10B | $15B | USD / 6:00 PM |
| Fed Pace of MBS Purchases | $5B | $10B | USD / 6:00 PM |
| FOMC Rate Decision | 0.25% | 0.25% | USD / 6:00 PM |
Currency Tech
EURUSD
R 2: 1.3110
R 1: 1.3000
CURRENT: 1.2957
S 1: 1.2860
S 2: 1.2755
GBPUSD
R 2: 1.6440
R 1: 1.6342
CURRENT: 1.6283
S 1: 1.6162
S 2: 1.6052
USDJPY
R 2: 108.00
R 1: 107.50
CURRENT: 107.27
S 1: 106.65
S 2: 106.05
USDCHF
R 2: 0.9456
R 1: 0.9404
CURRENT: 0.9344
S 1: 0.9287
S 2: 0.9245