Forex Afternoon Wrap – 29/07

Jul 29, 1:45 pm

Markets await FOMC statement

Key Notes:

  • RBNZ Governor Wheeler Speech
  • Japan retail sales y/y 0.9% vs. 0.8%
  • Swiss UBS consumption indicator 1.68 vs. 1.62 previously
  • Gfk German consumer climate 10.1 vs. 10.1
  • UK M4 money supply m/m -0.5% vs. 0.4%
  • UK CBI realized sales 21 vs. 30

Later

  • US Pending home sales
  • Crude Oil Inventories
  • FOMC Statement

The Asian session got off to a start with a speech from RBNZ Governor Graeme Wheeler, which was largely focused on Inflation and the RBNZ’s policy outlook. Speaking at the event, the RBNZ Governor noted that further currency devaluation was necessary alongside a more accommodative monetary policy as well but that further rate cut decisions would be taken based on the flow of incoming data on the economy, but remained dovish on rate cuts while noting that it would about 12 months or so for inflation to get back to the RBNZ’s target range.

Although the Kiwi weakened since the start, the declines were more gradual. The Kiwi fell from the opening highs near 0.6723 to post a session low below 0.667.

The Aussie was trading soft today after opening near the highs of 0.7348 after the currency posted a strong gain yesterday. The AUDUSD alongside other USD crosses are likely to stay range bound heading into today’s FOMC statement.

The Yen initially strengthened during the Asian session but the Greenback managed to gain as USDJPY reversed its losses from the daily lows near 123.36 to trade near 123.7 at the time of writing. The price level of 124 is a crucial support/resistance level, which could shift sentiment in either direction easily.

The European trading session did not see any major releases worth noting. The single currency was mostly flat for the day trading within yesterday’s range. EURUSD briefly tested the highs of 1.10785 before falling to daily lows near 1.103 and could move sideways until the FOMC statement. The British Pound was bullish today as the Cable posted daily highs near 1.5666; a few pips shy off the 1.57 highs.

The US Dollar index is trading within yesterday’s range in a consolidation that is likely to see a break out after tonight’s FOMC statement. Considering that tonight’s FOMC event will be the last meeting ahead of September’s policy setting meeting, the markets are likely to scrutinize the tone and language of the statement to gain any clues regarding the September rate hikes. In terms of other economic data, the US pending home sales data is due followed by the weekly Crude oil inventory report and finally the FOMC statement later in the evening.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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