Sitting Tight awaiting the FOMC

Sitting Tight awaiting the FOMC

The markets are sitting tight waiting for the Fed decision, but more so Dr. Yellen’s forward outlook and, of course, the accompanying statement. As is the case with most Fed” pressers”, it will mainly involve deciphering the Feds verbal gymnastics while looking for a smoking gun – tonight’s smoking gun will be in the form of a hawkish or dovish Fed lean.

Despite the imminent US rate, hike investors have been in a festive mood with the S & P trading up 15 points or .7 % at the close. The market does not view the Feds as the Grinch that stole Christmas but rather are seeing the rate hike a sign of a healthy US  economy, notwithstanding the fact it is only 25 basis point bump.
US Treasury 10-year yields are trading narrowly lower on the day at 2.46-7 %.

Australian Dollar

The positive data from China yesterday with moth Retail Sales and Industrial Production coming in higher than expected as the market is heading into yearend with a rather upbeat view of Mainland’s growth story but the Aussie continues to struggle above the .7500. The fly in the ointment is the weaker run of Aussie economic data, and with dealers shifting attention to tomorrow’s  Aussie Jobs Report, traders  are concerned that the current rush towards part-time workforce at the expense of the  Full-time employment numbers, could eventually be a concern for the RBA if the current trend intensifies

While I maintain external drivers will continue to dominate the overall Aussie dollar landscape, it is important for dealers to confirm the current trend moves are supported by domestic economic prints, especially when closing in on the primary resistance levels. ( .7500-.25)

 

Japanese Yen

Despite US bond yields trading marginally lower, the USDJPY remains supported by the Santa Claus rally in equity markets and the latest musings from the Bank of Japan, who will extend the deadline for its industrial loan program, emphasising the Central Bank’s commitment to economic expansion.

However, overnight price action and tight ranges are speaking volumes: the market is sitting tight awaiting the key FOMC statement.

Yuan

With capital outflow headlines grabbing all the attention, it was great to see more positive data out of China, the highlight of yesterday’s session. The data failed to generate significant price action, yet the run of positive economic data supports the markets renewed optimism regarding Mainland’s economy.

While not a game changer in the currency markets, it is Yuan supportive nonetheless.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Senior Currency Trader and Analyst at OANDA
Stephen has over 25 years of experience in the financial markets and specializes in Asian currencies at OANDA. After having started his trading career with NatWest Bank, he is currently based in Singapore as a Senior Currency Trader and Analyst with OANDA, focusing on the movement of the Aussie Dollar and ASEAN Currencies. Stephen has an extensive trading experience in Interest Rate Futures, Money Markets and Precious Metals. Prior to joining OANDA, he worked with organizations like Cambridge Mercantile, Nat West, Garvin Guy Butler, Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes
Stephen Innes

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