Markets pause ahead of FOMC: Calm before the storm?

Olalekan Akinola Independent Analyst

The forex market is quiet as we head into the North American session. Not much is happening across the board today after the heavy start to the week, driven by US dollar strength yesterday.

EURUSD is barely changed in today’s session, down 0.09% and holding on to support around 1.1525. GBPUSD is down 0.13% despite weaker-than-expected UK labor market data, with the release of the Claimant Count report this morning.

AUDUSD is down about 0.20%, while NZDUSD is down about 0.30% in today’s session, with sentiment remaining negative as Middle East tensions have yet to ease. NZDUSD is searching for a break below support around 0.5750, a key level for sellers to clear.

The US dollar is still the strongest currency in the market today, gaining about 0.16%, while JPY lags the most, down about 0.28%. USDJPY is up about 0.50%, trading around 155.028 and searching for a break above resistance around 155.300.

In the metals market, gold tested resistance near $4,315 earlier this morning and is now trading around $4,275 as of the time of writing, with buyers buying the dip from this morning’s lows around $4,260. Sellers still maintain control over the asset, but there is nothing out of the ordinary in today’s session.

Silver, on the other hand, has barely moved in today’s session, with a daily change of about 0.06%. Buyers defended support around $62.500 yesterday, pushing price back above $63.000. It is now trading around $63.275 as of the time of writing.

WTI is still drawing a significant premium from the Middle East crisis. Price jumped from support around $100/bbl yesterday to a high of $104.15 today before gains were checked, bringing it back towards $102.05/bbl. Price is up over 1% today, over 2.5% for the week and a stunning 19% for the month.

The calm in the market today could be linked to a lack of major headlines, but the market could also already be looking ahead to the storm coming tomorrow with the FOMC. There is so much at stake, with the market aggressively pricing in a hawkish Fed. It remains to be seen whether the Federal Reserve will back the market’s pricing or disappoint expectations, leading to a significant unwinding of current bets.

Traders should also watch for some positioning across major assets ahead of tomorrow’s FOMC, with so many key levels in play. Key support levels on gold and silver could be tested if sellers regain momentum, while breaks below support on NZDUSD and EURUSD could strengthen sellers’ control of the assets.

Author

Olalekan Akinola

Independent Analyst

Olalekan Akinola is a financial-markets analyst and writer with five years of experience covering forex, commodities, and global macroeconomic developments.

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