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US Dollar Backtracks as FOMC Rate Decision Looms Ahead

US Dollar Backtracks as FOMC Rate Decision Looms Ahead

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar Drops Amid Pre-Positioning Before FOMC Policy Announcement
  • Euro Unlikely to Find Lasting Direction Cues in German IFO Survey Data
  • See Economic Releases Directly on Your Charts with the DailyFX News App

The US Dollar underperformed in overnight trade as front-end yields declined, hinting weakness may reflect pre-positioning ahead of this week’s much-anticipated FOMC policy meeting. Traders may be paring back exposure in favor of a more neutral posture until after event risk passes having rebuilt bets on a 2015 rate hike over the past two weeks (as reflected in the December Fed Funds futures contract).

July’s German IFO survey of business confidence headlines the economic calendar in European trading hours. The headline Business Climate gauge is expected to edge narrowly lower, marking the third consecutive month of deterioration. The release seems unlikely to have a significant impact on the Euro however considering its limited implications for near-term ECB monetary policy, which appears to be on auto-pilot for the time being.

Later in the day, US Durable Goods orders data enters the spotlight. An increase of 3.2 percent is being penciled in for June, which would amount to the strongest uptick in three months. US economic news-flow has increasingly outperformed relative to consensus forecasts over recent weeks, opening the door for an upside surprise. Follow-through may prove constrained however, with traders unwilling to firmly commit to a directional bias until after the FOMC announcement is behind them.

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Asia Session

GMTCCYEVENTACTEXPPREV
23:50JPYPPI Services (YoY) (JUN)0.4%0.6%0.6%
01:30CNYIndustrial Profits (YoY) (JUN)-0.3%-0.6%

European Session

GMTCCYEVENTEXP/ACTPREVIMPACT
06:00EURGerman Import Price Index (MoM) (JUN)-0.5% (A)-0.2%Low
06:00EURGerman Import Price Index (YoY) (JUN)-1.4% (A)-0.8%Low
07:00CHFTotal Sight Deposits (JUL 24) -460.86BLow
07:00CHFDomestic Sight Deposits (JUL 24) -396.75BLow
08:00EURGerman IFO Business Climate (JUL)107.2107.4Medium
08:00EURGerman IFO Current Assessment (JUL)112.9113.1Medium
08:00EURGerman IFO Expectations (JUL)101.8102.0Medium
08:00EUREurozone M3 Money Supply (YoY) (JUN)5.1%5.0%Medium
08:00EUREurozone M3 3-month average (JUN)5.1%5.0%Medium
10:00GBPCBI Trends Total Orders (JUL)-6-7Low
10:00GBPCBI Trends Selling Prices (JUL)-8-7Low
10:00GBPCBI Business Optimism (JUL)13Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.08261.08971.09411.09681.10121.10391.1110
GBPUSD1.53821.54411.54751.55001.55341.55591.5618

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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