The US dollar index keeps rounding above the 103.60 historical support level. The buyers have already defended this level for three weeks, highlighting their interest in the greenback. Thus, buying USD looks less risky right now.
Key Market Driver: FOMC Statement
What will happen?
The FOMC, a committee within the Federal Reserve, will hold an important meeting and press conference on September 22 at 21:00 MT time (GMT+3). FOMC’s comments will hugely affect the US dollar and thus all the pairs with the USD and US indices such as S&P 500 (US500), Nasdaq (US100), etc. This committee will discuss what time to start reducing bond buys and hiking interest rates.
Why is it important?
All the market participants are waiting eagerly for this moment as it will bring volatility to the markets. However, most analysts don’t expect any hawkish moves from the Fed this time as the US Inflation Rate came out lower than expected and it can ease pressure on the Fed.
Last time, the Federal Reserve was dovish. Therefore, the USD weakened and EUR/USD surged by 300 points only in 1 hour! After that, EUR/USD continued rising further as the Fed meeting has a long-term effect on the markets.
How to trade on the FOMC Statement?
- If the FOMC hints at tapering sooner than expected, the USD will rise.
- Otherwise, fall.
Instruments to trade: EUR/USD, GBP/USD, XAU/USD, US500.
On the H4 timeframe, the US dollar index has formed a bullish falling wedge. At the beginning of the trading session, the price is testing the upper border of this wedge. Thus, in case of a higher-than-expected Core PCE Price Index m/m, the US dollar will skyrocket against other currencies.
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This week may be the most important since the year started as the Fed assess the economic outlook and the US presents fresh NFP readings.
S&P Global, a private banking company, will release a monthly change in British Flash Manufacturing Purchasing Managers Index (PMI) on January 24, 11:30 GMT+2. The index is a leading indicator of economic health as businesses react quickly to market conditions, and purchasing managers hold the most current and relevant insight into the company's view of the economy.
The United States Bureau of Labor Statistics will publish the US Consumer Price Index (CPI) m/m on January 12 at 15:30 GMT+2. The index measures a change in the price of goods and services purchased by consumers.