Alpesh Patel
InvestingBetter.com
General market theme
No changes in the broader market theme over the past 24 hours with investors focused on the volatility of the markets which is keeping them cautious and reserved. We have high hopes that today however we will get a clearer outlook on the way the Fed is approaching this recent market behavior and we know how important their comments could be for all the major money instruments. More analysis below.
Price action highlights
Price action was more or less on the same tune yesterday with limited reactions from the major currency pairs to the fresh news. The Euro ended the day virtually unchanged even though during the European session it took a dive towards the 1.0820 area but later during the US hours the currency recovered. Today’s Fed meeting on monetary policy and the press statement that will follow will dictate further price action, 1.0900 is the target to the upside while the 1.0780 lows is the area of focus lower.
The Cable disregarded BoE Governor Carney’s bearish comments yesterday altogether and rallied to the upside to test its previous highs. It is clear to us now that the UK currency is not in sync with the fundamental drivers in the markets and even though the sentiment is bearish the Pound remains afloat. Today a possible bullish Fed press statement could put the Cable under pressure and drive it towards the 1.4200 area especially since the UK currency should be trading significantly lower given the fundamental conditions at this time.
Focus of the day
As mentioned above the focus of the day will be the Fed meeting on monetary policy, we expect no changes in policy so soon however the press statement itself will deliver the future guidance. If the Fed opt to leave their bullish rhetoric in place then the Dollar stands to gain from the reaffirmed confidence that the central bank will show to it and we believe that this is the most likely scenario.
In an opposite case changes in the future guidance to comment on the recent market volatility and how it can affect the domestic progress will be seen as signs of weakness and the Dollar will sell-off aggressively across the board.
Economic Calendar
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