FXStreet (Barcelona) – FX Strategists at TD Securities offer their view for probable price action in GBP/USD, USD/CAD, USD/JPY and NZD/USD into the FOMC Meeting and press conference today.
Key Quotes
“With a lot of moving parts at today’s policy FOMC policy decision and press conference, the USD may take its cue from Treasury markets for near term direction – particularly if any ambiguity or mixed messages accompany our call for an overall hawkish outcome.”
“Looking at rolling 24-hour intraday correlations (sampled hourly), we are not surprised to see that none of the major currencies are showing a particularly strong relationship in the immediate run up to today’s FOMC.”
“Trading ahead of the event has been choppy, consolidative, and generally confined to tight ranges for most G10 pairs. Within this, however, USDJPY has shown the highest and most consistent intraday correlation with US interest rate moves. This is true, we find, whether we look at 2-year, 5-year, or 10-year benchmarks and it is in keeping with our historical experience. That would suggest USDJPY would be the key FX market barometer for today’s events and puts important resistance at 124.62 and 125.86 into view. The latter is key, we emphasize, to our view that USDJPY may be approaching a peak for this up-cycle. A clear break above may open the door for a march toward 130.”
“Similarly, USDCAD looks poised to resume its rally on a hawkish Fed though this could prove temporary by the end of the week. The 1.2370 area appears to offer notable resistance there.”
“If the Fed defies our expectations and delivers a more dovish outcome, USDJPY will similarly perform to the downside, we think, but other options also arise. Specifically, we think GBPUSD may benefit from a renewed tailwind and extend the rally it enjoyed in the wake of solid employment data and moderately hawkish minutes from the MPC. At the same time, we will be keeping an eye on NZDUSD, which could face a reversal of recent declines as bearish positioning now looks considerably stretched ahead of this evening’s Q1 GDP report.”
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