FX Markets Coil in Anticipation of June FOMC Meeting
- EURUSD remains in symmetrical triangles.
- See the June forex seasonality report.
Absent concrete developments out of Greece, FX markets are starting to get ready for this week's scheduled fireworks. Those fireworks are the June FOMC meeting, of course, and market participants are evidently split on which way policymakers will break. There's either enough improved data in Q2'15 to declare that the slowdown in Q1'15 was transitory, or there's not and the probability of a rate hike this year is low.
In either case, the market seems primed for an explosive move, with several USD-pairs sitting at important technical levels that could determine the viability of breakout attempts. EURUSD is a particularly curious case, where price has constricted itself into two symmetrical triangles.
Given the growing threat of a tail-risk event revolving around Greece, and the possibility that the Fed takes on a more optimistic tone about the US economy, one can't help but feel that the massive reduction in Euro short positioning in the futures market (there were 138.0K net-short contracts held by speculators for the week ended June 9, nearly half of the level at the all-time high on March 31, at 226.6K net-short contracts) means that there's a considerable amount of cash on the sidelines that could come into play to dictate a major swing in price.
--- Written by Christopher Vecchio, Currency Strategist
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