Talking Points:
- June FOMC minutes released today could underscore the Fed's commitment to raising rates and normalizing policy.
- US Dollar rebound may gather pace next few days; though the greenback still hasn't bottomed yet.
- The retail crowd remains net-short AUD/USD, EUR/USD, GBP/USD, and net-long USD/JPY, although positioning has abated in recent days.
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After light trading conditions marked the start of the week thanks to the US holiday yesterday, traders look for liquidity conditions to normalize a bit today amid the first full trading day in North America. Thankfully for traders, there are quite a few economic data releases and policy-related events through the end of the week that should help stir volatility.
For the US Dollar, the timing of upcoming releases dovetails neatly with its recent rebound (via DXY Index). The June FOMC minutes set to be released today, for example, are likly to contain hawkish undertones as it was at the June FOMC meeting that the Fed not only raised rates by 25-bps, but they also steadfastly held to their prognosis that another rate hike would be necessary this year.
As market expectations are currently at odds with the Fed's rates forecasts - Fed funds are pricing in March 2018 as the period most likely for the next rate hike, for example - an injection of hawkish commentary from the FOMC minutes could be enough fuel to allow the US Dollar's short-term rebound to gather pace.
In particular, as US yields have continued to move higher, USD/JPY has started to break through key trend resistance from January while Gold loses key trend support over the same time horizon. Another burst higher in long-end US yields (the 10-year yield is up by ~20-bps the past week) should be enough to carry the greenback higher yet.
See the above video for technical considerations in EUR/USD, GBP/USD, USD/JPY, EUR/GBP, EUR/JPY, GBP/JPY, Gold, the DXY Index.
Read more: Euro Finds a Sorely Needed Bullish Driver in Recent ECB Commentary
--- Written by Christopher Vecchio, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
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