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.
Markets Ahead of Fed Meeting
- That day has come, guys! The Fed will hold a meeting at 21:00 GMT+3. It can be a highly impactful event. The markets expect the bank to hint about the timing of tapering.
- Fed Chair Jerome Powell holds a press conference at 21:30 GMT+3 which can become the main driver of the market reaction. Dovish comments will press the USD down, while comments about soon tightening will push the USD up. Look how markets reacted last time.
- Concerns over China Evergrande Group’s debt crisis eased. The Hang Seng index has reversed up today and jumped back above 24,000.
- The Bank of Japan kept policy unchanged and reinforced expectations the BOJ will maintain its massive stimulus even as other countries are getting ready for withdrawal of financial support. As a result, the JPY dropped and USD/JPY rocketed above 109.50.
There was no room for USD/JPY to fall: the support line and the lower line of Bollinger Bands were the main barriers. USD/JPY will likely surge to the resistance level of 109.90, where two moving averages and midline of Bollinger Bands lie. The pair will struggle to cross this level, but if it jumps above it, it can rocket to 110.310.
S&P 500, the US broad market index, has reversed up from the 100-day moving average of 4340. Now it’s edging higher to the 50-day moving average of 4440. Support levels are the 100-day MA of 4340 and the low of July 19 at 4280.
GBP/USD has plunged dramatically. Now it has paused near 1.3650, and the RSI indicator signals that the pair has approached the oversold territory. If GBP/USD manages to break the psychological mark of 1.3700, it will jump to late August highs of 1.3760.
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.