Alpesh Patel
InvestingBetter.com
General market theme
At the beginning of the week most major instruments had little to show for in terms of price action even though the days ahead will be filled with key news and reports. Over the past 24 hours the currency markets traded in favor of the US Dollar almost across the board just a couple of days ahead of the FOMC meeting where it is almost certain that the Fed will announce rates to remain at their current levels.
However it seems that investors are expecting a more bullish approach from the Fed in their commentary and that could be the reason behind the demand in the Dollar. It is important to note though that before the Fed meeting the US currency has to tackle the release of the Retail Sales figures where the consensus is towards a lower reading.
Price action highlights
The Euro started the week under pressure from the US Dollar and even though the currency was trading above the 1.1100 area during the early European hours it later declined and is now in close proximity of the 1.1050 level. This level is a hey support area for the Euro at this time and a clear breakout lower should attract more attention from market participants, however we need to be sure about it as the Dollar might be a bit fragile today ahead of the Retail Sales report.
The Cable has been running a correction rally since the beginning of the week and as soon as the Asian markets opened late on Sunday the UK currency has been on the decline. Trading off the 1.4400 highs the Pound has dropped to the 1.4250 area this morning and it seems that the momentum is pointing downwards for the time being as investors are looking for a bullish bias from the Fed. Again though we need to advise caution ahead of the Retail Sales report today as it might put a temporary stop on the Dollar’s advance.
Focus of the day
The only event worth keeping an eye out for today is undoubtedly the release of the Retail Sales levels from the US as we mentioned above. The US Dollar has seen a good advance during the last couple of days and a potentially lower reading in the consumer report might take some of the momentum away so we need to approach the major instruments cautiously today.
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