EUR from trading – A quiet day is likely as we head towards the FOMC, with position shuffling the main source of flow. FOMC is a tough call, I think a broadly neutral outcome is the most likely scenario though nuanced hints in either direction will cause movement. Arguably people expect Yellen to maintain her dovish stance so anything more hawkish will induce the bigger movement but it feels like a coin flip to me. Whilst I have been consistently biased towards a lower EUR/USD the price action has disappointed for over 3 weeks, which is starting to feel like a pattern. I am flat cash but have a bit of EUR/USD downside exposure via short dated options. Resistance at 1.2785 and then last week’s 1.2841 high; support at 1.2685 (yesterday’s low) and 1.2614 (last week’s bottom).From EM trading – Quiet start so far but USD/EM continuing its track lower this am on low volumes. Little to stand in the way of this pre FOMC. USDTRY breaks 2.20, USDZAR testing 10.82 (should be support here). Break sub 10.82 targets 10.75
BNP: To start with, the Riksbank has mimicked the ECB and set the IR to zero.Given the volume of SEK selling yesterday the survey results are helping the currency – however, the Riksbank made their dramatic move yesterday due to the inflation outlook, not the performance of the manufacturing sector. Any SEK rebound should therefore be limited.
GBPJPY looking ugly on the charts also usdjpy. People underestimate the likelihood for FED to lean against lower inflation expectation since the last meeting. Close to everybody expects taper to end but I think they will at least mention asset purchases could be restarted again if inflation expectations doesnt pick up…the big shock would be if they stop taper… but hey could do so without loss of credibility. This is from the text: However, asset purchases are not on a preset course and the Committee’s decisions about their pace will remain contingent on the Committee’s outlook for the labour market and INFLATION as well as its assessment of the likely efficacy and costs of such purchases.
Barx: Risk rallies hard again o/n as the market prices in a relatively dovish FED this evening. Personally I cannot see too much change in the statement (remember we do not get a press conference) with the “considerable time” language vague enough to keep equities on the front foot. We think risks favour long USDJPY (dips should be limited to 107.50/60) and cross jpy. Of course we will get a larger move out of any hawkish surprise – AUDUSD and EURUSD the best sells in this case – a LOT of long USD delta has been taken off the table in recent sessions.
Citi: G10 Portfolio Update: Move stop on NZDUSD ToTW
We are moving our stop higher on our long NZDUSD trade of the week heading into this evening’s Fed and data out of the RBNZ. Previously at 0.7790, we are moving it higher to 0.7905, locking in ~0.7% return.
EURUSD: Talk that most speculative players are square into the FOMC. Should the FOMC statement be USD bearish, they are looking to sell EURUSD in the 1.28 zone with stops placed above 1,2830 (break above has technical potential for a move to 1.30 handle). Until FOMC sideways limited range well within 1.2700/1.2770 is expected.