Markets Mixed Ahead of Fed Decision Today
The Federal Reserve’s FOMC will be concluding its two-day monetary policy meeting today. Investors are bracing for a quarter basis point rate cut at today’s meeting. Besides the FOMC decision today, US and China trade talks have resumed. However, investors are less optimistic that a trade deal could be reached. As a result, the US dollar closed flat on Tuesday.
Euro Showing Signs of Bottoming
The common currency is seen consolidating near the lows. After slipping to 1.1101, the EURUSD currency pair has been attempting to post a bottom. Germany’s flash inflation estimates were positive. For July, headline CPI was seen rising 1.7%, advancing from 1.6% in June. The eurozone’s flash inflation estimates are due today. Forecasts point to a slower increase in consumer prices.
EURUSD Could Bounce Higher
The consolidation near the 1.1140 level of support is showing signs that the currency pair is preparing for a short term correction to the upside. The resistance level of 1.1250 remains the key challenge to the upside. As long as this resistance level is not breached, the currency pair is biased to the downside.
Sterling Chalks a New Two-Year Low
The declines in the pound sterling continued with the GBP falling to a fresh two-year low. The current bearish momentum in GBPUSD could eventually push it further down to test a three-year low. The declines come as investors adjust their expectations to price in a no-deal Brexit. The EU and the UK are in a stalemate with the Irish backstop arrangement being the sticking point for the two sides.
GBPUSD Rebounding off the Two-Year Low
The cable is seen rebounding off the lows at 1.2125, but price action remains confined to the previous H4 session. Given that the USD will be volatile today, GBP could likely rise in the near term. However, the upside bias remains weak at the moment. A breakdown below 1.2125 could, however, trigger further declines that could push GBPUSD down to 1.1990.
Gold Prices Hold Steady Near the Top
The precious metal managed to post some modest gains on Tuesday but price action remains subdued. This indicates that investors are likely to wait on the sidelines into today’s Fed meeting. Economic data on Tuesday saw US inflation slipping below the Fed’s 2.0% inflation target rate.
Outlook for XAUUSD Remains Mixed
Price has stalled near the resistance area of 1431–1428 on the 4-hour chart. If this resistance holds, we could expect to see a downside breakout. However, given the volatility, we could expect a short term rebound to the upside. The previous highs near 1440 levels remain key. To the downside, a breakdown of the rising trend line could signal a move to 1404 level of support.