Daily FX Trading Review: Profit-Taking Ahead of FOMC Statement? – Sept 16, 2014

Daily FX Trading Review: Profit-Taking Ahead of FOMC Statement? - Sept 16, 2014

The US dollar returned some of its recent FX trading wins, as traders continued to reduce their dollar exposure ahead of this week’s FOMC statement. Data from the US came in mixed, with the Empire State manufacturing index showing a stronger than expected jump from 14.7 to 27.5 and the industrial production report printing a 0.1% decline. US PPI and TIC long-term purchases are due today, both of which aren’t likely to spur huge dollar moves unless the figures come in way above or below expectations. Both core and headline PPI are slated to print 0.1% gains.

The euro struggled to hold on to its current FX trading levels, as traders are anticipating weak demand for the ECB’s TLTRO this week. Euro zone trade balance came in weaker than expected, showing a smaller trade surplus of 12.2 billion EUR from the previous 13.8 billion EUR and the estimated 15.9 billion EUR. German and euro zone ZEW economic sentiment data are due today and more declines are expected, with the German ZEW projected to dip from 8.6 to 5.2 and the region’s ZEW likely to fall from 23.7 to 21.3.

FX Trading Fundamentals

The pound held steady against most of its major FX trading counterparts, waiting for the top-tier events in the UK this week. For today, the CPI figures are due and another decline in the headline inflation report is expected while the core figure could hold steady at 1.8%. Underlying inflation figures, such as the PPI and HPI, might also have an impact on pound movement as negative readings could increase the downward pressure on the currency.

The franc is trading uneasily ahead of the SNB decision this week, with some traders expecting to see negative deposit rates or FX trading intervention from the Swiss central bank. Bear in mind that EUR/CHF is trading dangerously close to the SNB floor at 1.2000 and jawboning could provide support for the pair. Swiss PPI was weaker than expected as it showed a 0.2% decline, reminding market participants that deflation is also a threat in Switzerland. There are no economic reports due from the country today.

The yen recovered some of its recent FX trading losses, particularly against the dollar and the Aussie. There were no reports released from Japan yesterday as banks were closed on holiday while today has BOJ Governor Kuroda’s speech on tap. He isn’t likely to drop any huge hints on potential easing, as the central bank head has insisted that the economy could stay resilient.

After gapping down over the weekend, AUDUSD enjoyed a bit of support as it climbed back above the .9000 handle. Chinese foreign direct investment marked a 1.8% decline, another point against the Australian dollar. Minutes of the RBA meeting showed that policymakers are getting more concerned about rising house prices in the country and that the central bank has no plans of cutting rates. Later on, Canadian manufacturing sales data is due and might show a stronger 1.1% gain compared to the previous 0.6% uptick. BOC Governor Poloz also has a speech scheduled during the US FX trading session.

To contact the reporter of the story: James Brennan at james@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.