Good morning,
Reuters reports today - dollar was under pressure in Asian trading on Thursday, after weak U.S. inflation data led investors to pare bets that the Federal Reserve will raise interest rates later in the day.
The outcome of the two-day Fed meeting continued to grip investors' attention, particularly after a surprising 0.1 percent decline in U.S. consumer prices in August.
One mover was the Australian dollar , which was last nearly flat at $0.7197 after investors locked in gains when it earlier blipped above $0.7200 for the first time since late August, taking its cue from rallying domestic equities.
"It was just a little bit of profit-taking after the U.S. dollar weakness that we've seen across the board last night, which is probably prudent with the Fed just around the corner," said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong.
"It's all just position-squaring pre-Fed, which is really the key," she said. "The ranges are pretty consistent with this big event risk."
With the Fed firmly in focus, foreign exchange market participants took in stride Standard and Poor's downgrade of Japan's credit rating by one notch to A+ late on Wednesday. The cut brings its rating in line with those of rivals Moody's Investors Service and Fitch Ratings.
Investors also shrugged off data on Thursday that showed Japan's exports slowed for a second straight month in August, heightening fears that China's slowdown was increasing dragging on the global economy and reinforcing expectations that policymakers eventually would be forced to muster fresh stimulus steps.
The common currency steadied after dipping overnight after euro zone inflation for August was revised to be weaker than initially thought, backing expectations of more bond-buying stimulus from the European Central Bank.
The dollar index, which tracks the U.S. unit against a basket of six major counterparts, was down about 0.1 percent at 95.297, but still above a three-week low of 94.913 plumbed on Monday as investors pondered what the U.S. central bank will announce at 1800 GMT.
"While the rates decision will be the initial focus, it may not be the decisive factor for markets," wrote Sean Callow, senior currency strategist at Westpac in Sydney, who says investors could also react to changes in the central bank's forecasts.
"We will also see quarterly projections of growth, unemployment, inflation and the funds rate. This should include upward revisions to GDP projections but a lower profile for interest rates," Callow said in a note to clients on Thursday.
Westpac is among those expecting the Fed to hike its federal funds rate by 25 basis points - its first increase since 2006 - due to job market improvement, solid growth and sufficient inflation.
After Wednesday's lacklustre inflation figures, the chance that the U.S. central bank would end its near-zero interest rate policy fell to 21 percent , down from 27 percent late on Tuesday, according to CME Group's FedWatch program.
So, guys, as our GBP expectations have failed, or better to say inflation data fastly has erased all setups, we have to postpone further analysis of GBP on a later time. Our DRPO "Buy" on intraday charts has worked, but B&B "Sell" has not reached it's target and we haven't got second chance for short entry. As you can see from current situation - breakeven stops are very important tool.
So we just need to see what will happen, as monthly grabber is still valid, market has shown significant rally and we should take a look on what it will be...
Thus, today we will take a look at EUR again, since market more or less has clarify situation. As we've said previously we have a deal with weak bullish context. Following market mechanics, we've said that EUR should show just minor retracement down since large retracement already has happened, when EUR has reached major 50% Fib support level. So, this has happened yesterday. As a result, market also has formed nicely looking bullish grabber on daily chart:
Overall situation is rather simple. Market stands very close to daily trend breakeven point and we have bullish pattern. Major retracement already done. Thus, any turning of the EUR to downward action and breaking of daily trend down will be bearish sign and probably will bring market significantly lower - to 1.0850 lows, or at least to trend line support.
Thus, for taking any long position we could stick with the grabber. if it will fail - market will erase all bullish signs at one time - destroy pattern, trend, move below pivots etc...
Actually what we've discussed is nothing more but DiNapoli "Minesweeper" entry technique for daily time frame. We've waited when daily trend will shift bullish and then should take long postion on 4-hour chart at K-support area:
Those of you who have taken long there - well done. But as right now we could stick to grabber directly, we could reduce the scale and use just most recent swing up:
Currently market already has done 3/8 retracement and could form butterfly, but if somehow it will turn to retracement first, it could be used for long entry as well.
But again, as soon as grabber will be done, it is difficult right now to count on some signficant upside actin. Since, as we've said in the begnining - overall setup is not really impressive. Still, Fed dovish comments and rate decision could support upside action
