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FOREX: US Data & Profit Taking Dynamics Support Greenback Pre-FOMC

FOREX
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  • Downside momentum for the US dollar lost steam on Tuesday, with the USD index unable to breach the previous lows seen in August. A firmer US advanced retail sales number and stronger-than-expected IP have supported a moderate correction higher for the DXY as we approach the pivotal FOMC decision on Wednesday.
  • USDJPY (+0.95%) has had the most notable correction, with an impressive bounce from the 139.58 lows on Monday. Spot resides just below session highs of 142.00 as we approach the APAC crossover and firm resistance is not seen until 143.95, the 20-day EMA.
  • GBP is underperforming on the session, declining 0.45% to trade back at 1.3160 against the dollar. We noted yesterday that overall, GBPUSD maintains a firmer tone having recovered from last week’s low around 1.3000. A stronger reversal higher would refocus attention on key short-term resistance ahead of the BOE decision this week. This resides at 1.3266, the Aug 27 high.
  • A late dip lower for major equity benchmarks has also weighed on the likes of NZD and the Euro, although most G10 ranges remain relatively contained given the proximity to the Fed decision tomorrow.
  • In emerging markets, the Mexican peso is rallying once more, assisted by an impressive 2.5% off the lows in MXNJPY, taking advantage of the higher yields and a calmer political backdrop in comparison to last week.
  • UK Inflation data kicks off the docket on Wednesday ahead of Thursday’s BOE decision. However, all the focus will be on the highly anticipated FOMC decision and accompanying press conference. 
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  • Downside momentum for the US dollar lost steam on Tuesday, with the USD index unable to breach the previous lows seen in August. A firmer US advanced retail sales number and stronger-than-expected IP have supported a moderate correction higher for the DXY as we approach the pivotal FOMC decision on Wednesday.
  • USDJPY (+0.95%) has had the most notable correction, with an impressive bounce from the 139.58 lows on Monday. Spot resides just below session highs of 142.00 as we approach the APAC crossover and firm resistance is not seen until 143.95, the 20-day EMA.
  • GBP is underperforming on the session, declining 0.45% to trade back at 1.3160 against the dollar. We noted yesterday that overall, GBPUSD maintains a firmer tone having recovered from last week’s low around 1.3000. A stronger reversal higher would refocus attention on key short-term resistance ahead of the BOE decision this week. This resides at 1.3266, the Aug 27 high.
  • A late dip lower for major equity benchmarks has also weighed on the likes of NZD and the Euro, although most G10 ranges remain relatively contained given the proximity to the Fed decision tomorrow.
  • In emerging markets, the Mexican peso is rallying once more, assisted by an impressive 2.5% off the lows in MXNJPY, taking advantage of the higher yields and a calmer political backdrop in comparison to last week.
  • UK Inflation data kicks off the docket on Wednesday ahead of Thursday’s BOE decision. However, all the focus will be on the highly anticipated FOMC decision and accompanying press conference.