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US AM Digest: US Dollar Softer on Cusp of Powell's First FOMC Meeting

US AM Digest: US Dollar Softer on Cusp of Powell's First FOMC Meeting

2018-03-21 13:29:00
DailyFX Research,
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The US Dollar (via DXY Index) is trading lower at the start of trading in New York on Wednesday as traders patiently await the first FOMC decision helmed by newly-minted Fed Chair Jerome Powell. While rates markets are pricing in a 100% chance of a 25-bps rate hike today, attention will be on the Summary of Economic Projections for the updated growth and inflation forecasts as well as the new ‘dot plot’ – the glide path of interest rates. Attention also remains on the news wire with the Trump administration’s grace period for tariffs ending on Friday. Elsewhere, the British Pound has been able to pick back up to the topside following a stronger than expected employment report for the month of January. Later today, after the FOMC decision, the Reserve Bank of New Zealand is convening.

DailyFX Economic Calendar: Wednesday, March 21, 2018 – North American Releases

US AM Digest: US Dollar Softer on Cusp of Powell's First FOMC Meeting

The North American economic calendar finally will have some influence over FX markets today with significant data and events out of the United States; the Canadian docket is empty. February US Existing Home Sales are due out at 10 EDT/14 GMT and are worth watching amid what has been a noticeable decline in US housing data since November 2017. Rising mortgage rates plus a tighter supply of homes are crimping affordability. At 10:30 EDT/14:30 GMT the weekly DOE energy inventories are due out, which tend to impact Crude Oil prices and the CAD-crosses. Later today, the Federal Reserve will announce its March policy decision, the first under Fed Chair Jerome Powell, where it is widely anticipated that the main rate will be hiked by 25-bps. Chief Currency Strategist John Kicklighter will be covering the FOMC decision live starting at 13:45 EDT/17:45 GMT.

DailyFX Webinar Calendar: Wednesday, March 21, 2018

US AM Digest: US Dollar Softer on Cusp of Powell's First FOMC Meeting

IG Client Sentiment Index Chart of the Day: USDJPY

US AM Digest: US Dollar Softer on Cusp of Powell's First FOMC Meeting

USDJPY: Retail trader data shows 72.4% of traders are net-long with the ratio of traders long to short at 2.62 to 1. In fact, traders have remained net-long since Dec 29 when USDJPY traded near 112.39; price has moved 5.4% lower since then. The number of traders net-long is 2.4% lower than yesterday and 2.7% higher from last week, while the number of traders net-short is 14.2% higher than yesterday and 3.1% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDJPY prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed USDJPY trading bias.

Learn more about the IG Client Sentiment Index on the DailyFX Sentiment page

Five Things Traders are Reading

  1. “DXY Index Trades Sideways into March FOMC Meeting - What to Expect” by Christopher Vecchio, CFA, Senior Currency Strategist
  2. “Charts Ahead of FOMC – USD, Euro, Gold, S&P 500 & More” by Paul Robinson, Market Analyst
  3. “GBP Well Placed to Climb Further After Strong UK Employment Report” by Martin Essex, MSTA, Analyst and Editor
  4. “EURNZD Looking to Push Even Higher” by Nick Cawley, Market Analyst
  5. “Canadian Dollar Up on NAFTA Hopes, NZ Dollar Down Before RBNZ” by Ilya Spivak, Senior Currency Strategist

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