By Orbex
The US dollar has been a little firmer again over the European morning on Wednesday. The main event focus today is the FOMC meeting later in today’s US session. While the Fed is not expected to move on rates, traders will be keen to see if the Fed’s outlook has shifted at all. The recent corona-virus outbreak poses downside risks. Although, resilience in the labor market and private consumption data should keep the outlook fairly balanced. USD index trades 97.88 last.
EURUSD continues lower today with price testing the 1.10 level again. The level held as support yesterday though looks vulnerable to a break today if the Fed refrains from any dovishness in its outlook. It’s been a quiet week for Eurozone data with the CPI flash on Friday the only key release to note.
GBPUSD continues to hug the local rising trend line ahead of tomorrow’s BOE meeting. The market is divided over whether the bank will ease, in light of recent dovish commentary and weak data. Now, with the outbreak of corona-virus, it looks like rate cut risks have increased, which could see GBPUSD move sharply below the 1.2978 support.
Risk assets continue to recover off the initial lows posted on the week in response to news of the growing severity of the corona-virus outbreak. Following a gap lower at the open on Sunday, which took price below the 3261.46 level, the SPX500 has since recovered to 3285.93 last. Any dovishness from the Fed today could help propel the recovery further.
Safe havens have been higher again today with both the Japanese yen and gold trading higher against USD in light of the broader risk-off tone across markets. USDJPY trades 109.00 last, having found resistance as it closed the weekly gap. XAUUSD trades 1571.11 last, with price rebounding off yesterday’s lows.
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Oil prices have softened a little this morning though have been higher over the last 24 hours in response to the API reporting an unexpected 4 million barrel draw. If this inventory decline is confirmed by the EIA today, that could help crude further recover off the 52.73 level. Market sits at 53.97 last, having found resistance yesterday at the weekly gap close.
USDCAD has been higher today, though is down from yesterday’s highs which were capped by the 1.3207 resistance level. The rebound in crude prices has helped CAD recover somewhat and any dovishness from the Fed tonight could see the recovery gain further traction.
AUDUSD has been a little weaker again today though the recent sell-off has stalled for now. Overnight QoQ CPI came in better than expected at 0.7% vs 0.5% expected. However, the market is still looking for an RBA rate cut in February which should keep sentiment skewed to the downside in the near term.
By Orbex