Today, all eyes will be on the FOMC monetary policy announcement and the subsequent Press Conference with Janet Yellen. Some USD pairs are consolidating ahead of this event risk, and breakouts are imminent today. Let’s take a look at the EUR/USD, GBP/USD, USD/CAD, and NZD/USD
EUR/USD is trying to form a price bottom. A dovish FOMC statement will very likely give traders a reason to trade off this price bottom, and push towards the 1.3621 and 1.3676 pivots. If the FOMC is neutral, see if price can hold above 1.3536. If it can, there is upside toward the 1.3620 pivot. Below 1.3535, the focus remains toward the 1.3512 low, 1.35 handle, and the 1.3476 low on the year. This is the likely scenario with a hawkish FOMC.
GBP/USD is consolidating after a bullish month so far in June. The rally last week was on the back of Mark Carney’s hawkish statement that the BoE might raise rates sooner than the markets expected. Today’s BoE meeting minutes revealed that the bank is surprised the market is not pricing in a 2014 rate hike – basically what Carney said to get GBP/USD to 1.70. However, since this hawkish tone was no surprise, GBP/USD did not have enough to break above 1.7010. It remains in consolidation, and actually put in a new low on the week at 1.6932. A hawkish FOMC should pull the GBP/USD down towards the 1.6845 pivot. If we get a neutral FOMC, the bearish correction might be shorter. A dovish FOMC however should pressure the USD and allow traders to extend GBP/USD above 1.7010 to test the 2009-high at 1.7040.
USD/CAD is essentially consolidating near the lower bound of a larger consolidation range going back to May. Today, we had better than expected wholesale sales from Canada, which helped keep the USD/CAD in consolidation. A Hawkish FOMC statement should put pressure on the 1.0881 pivot, a break above which opens up the resistance pivots, 1.0920, 1.0940, and 1.0960. A Dovish one should put the focus toward the 1.0814-22 lows as well as the 1.08 handle. A neutral FOMC would not favor a breakout to either side, and we’ll have to see.
NZD/USD has been bullish in June as the RBNZ continued its rate hike campaign for the 3rd straight time, bringing the official cash rate to 3.75%. The 4H chart shows NZD/USD consolidating between 0.8642 and 0.87. A dovish FOMC should pave the way for bullish continuation with the 0.8779 high in sight. A neutral FOMC might not favor a breakout on either side, but there is prevailing bullish bias. A hawkish FOMC should give USD strength, and if price reacts with a break below 0.8640 it exposes the 0.8554 pivot. However, the NZD/USD might still be bullish if price can hold above that 0.8554 pivot.
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