The market is well aware of the key fundamental releases tomorrow from the US: ADP employment change followed by advanced GDP estimate for Q2. The FOMC is also scheduled to make its monetary policy announcement tomorrow after these 2 data points. With that in mind, it appears the market is pricing in a hawkish FOMC, as the USD trucks along. Let’s take a look at the EUR/USD, GBP/USD, and USD/JPY.
The EUR/USD is falling toward 1.34. There is no reason to believe it will reverse yet, but the RSI readings in the 1H , 4H, and daily charts are all in oversold territory. There is still downside risk toward the 1.3295-1.33 Nov. 2013-low, but we can expect some intra-session consolidation around 1.34 given the oversold technical signs, especially as traders don’t want to get caught too close in front of tomorrow’s fundamental risks. If at the end of the day, the FOMC is hawkish, and indeed hints at a rate hike before mid-2015, or even just accelerates tapering, we might see EUR/USD continue lower without a hitch and should keep price below this week’s high at 1.3445 as it attempts to push to 1.33. Otherwise, if the FOMC is neutral, and does not speed up tapering, we can expect some consolidation, with upside risk in the short-term toward the 1.35 area.
The USD/JPY is breaking above 102 and a falling trendline since June. It is now essentially testing the 2014 descending triangle. The falling res