Summary:
- We will see the outcome of FOMC policy decision at September meeting which is considered as the most important move this year at early hours on Thursday BJT, with tapering plans in focus.
- Forex and precious metals trapped in consolidation ahead of the aforementioned decision, an indication of cautious tone.
The greenback mostly traded in a choppy session with some downward pressures on Tuesday, 19 September. It broke below the trading range this morning, with cautious tone ahead of Fed policy decision release at 0200 on Thursday BJT at FOMC’s September meeting that is considered as the most important move, not only because it may announce to start to reduce balance sheet, but also release the famous dot plot and projections of the future inflation path. We will also hear from FOMC chair Janet Yellen at 0230 when she will speak at the press conference.
Technical
The dollar index (DXY) closed the day slightly lower. It lost ground sharply early this morning below its short-term trading range given its short term moving averages went down after convergence in a choppy way while its long term moving averages continued to offer resistances on 1 hour chart. Wait and see if the index could sustain its decline.
As to non-US currencies, the euro rallied to 1.20 handle. Whether or not the shared currency could hold the circa 1.20 will be important to observe while its ability to hit a fresh yearly high will hinge on the outcome of FED decision. The British pound traded sideways in a corrective rebound. It will be interesting to see whether or not the price could bounce back again on the day. The Aussie dollar staged a V-shape recovery in a rally mode and moved back to circa opening price of Monday, indicating strong downside supports on the daily chart.
Now let us take a look at precious metals. The gold modestly rebounded and its short term moving averages which tended to converge distanced from its diverging long term moving averages which drifted lower on 4 hour chart, without clear reverse signals. It is expected to continue the consolidation mode in the run-up to FOMC policy decision.
Disclaimer: The views and opinions expressed in this article are those of the authors and for the purpose of reference only, and shall not be relied upon by investors in making any trading decisions.