BOJ Signals Potential Further Easing

Dollar Down Ahead of FOMC

The US dollar has moved lower over early European trading on Tuesday as the market starts to show signs of caution ahead of the upcoming FOMC meeting this week. The Fed is widely expected to announce a rate cut at tomorrow’s meeting with a .25% cut priced in though the risk of a larger .50% cut remains present. The index trades 97.82 last. Later today we have US PCE data, which is closely watched by the Fed.

Euro Recovers

EURUSD has traded higher against USD again today as the single currency takes advantage of some pre-FOMC weakness in the greenback. German CPI later today has the potential to reverse this current rally, however, if we see any downside surprises. EURUSD trades 1.1150 last, with price remaining supported by the 1.1130 level once again.

GBP Stabilizes But Still Weak

GBPUSD continues to plumb fresh 2019 lows this week as Brexit uncertainty continues to dampen sentiment. The market is widely expecting the BoE to strike an even more cautious tone when it meets later this week given Johnson’s appointment as PM. The new PM’s vow to take the UK out of the EU by October 31^st with or without a deal has increased the chances of a no-deal Brexit, sending GBP sinking lower. GBPUSD trades 1.2186 last with price currently rallying, tentatively, off the 1.2115 level.

Risk Sentiment Weaker

Risk assets have been a little weaker so far today, despite the softer US dollar. Positioning has lightened up ahead of the FOMC as traders prepare for the Fed’s rate announcement. A surprise cut of .50% could see SPX500 rocketing higher while a cut of just .25%, which is well priced in, might see some further unwinding in the SPX500. The index currently trades 3013.08, with price moving back below the 3019.38 level.

JPY Rallies Despite BOJ Easing Signal

Safe havens have been a little mixed today with gold trading slightly lower against USD while JPY has been firmer. Despite weakness in both USD and equities, XAUUSD trades 1433.48 last, softening a little from highs earlier in the day. USDJPY trades 108.55 last with JPY having rallied in the wake of the BOJ meeting overnight. The BOJ kept rates on hold but signaled its willingness to ease further if global conditions don’t improve.

Crude Rallying Ahead of API

Oil prices have firmed again today with crude once again testing the bearish trend line from year to date highs. Traders are waiting on the API report later today to see whether the US crude industry was in a drawdown once again last week. If so, and if confirmed by the main EIA report today, this would be the seventh straight week of declines in crude stores. This could be strongly bullish for oil. Crude trades 57.54 last with the recovery off the 54.85 level continuing.

CAD Up, AUD Down

USDCAD has softened today. With USD weaker ahead of the FOMC tomorrow and oil priced firming up, CAD has been well supported, weighing on USD. USDCAD trades 1.3172 last, still above the 1.3145 level, for now, keeping focus on further upside in the near term.

AUDUSD continues to break the hearts of AUD bulls today. The reversal from testing the bearish 2019 trend line has been swift and severe with price now trading back below the .6910 level support. A US rate cut this week cold stem the decline though any correction higher looks likely to be short-lived given the current pressure.