Can FOMC Minutes Fuel Demand For Dollars?
The U.S. dollar’s relief rally has lost some momentum with both EUR/USD and GBP/USD heading upwards. From a technical perspective it is noteworthy that the important resistance levels in both major currency pairs are still unbroken, at least for now. The greenback may receive attraction ahead of the FOMC meeting minutes which are scheduled for release today at 18:00 UTC. Bearing in mind that the Federal Reserve plans to raise interest rates one more time this year followed by another three hikes next year, the minutes should confirm the hawkish outlook. While this alone is dollar positive we have to consider that a December rate hike has been largely priced in by the markets. Thus, the minutes could possibly be a non-event for traders today but let us be surprised.
On the flipside, the euro received some support from Catalonia’s president Carles Puigdemont who stepped back from an immediate declaration of independence from Spain. He said he would “suspend” the referendum result for a period of some weeks for dialogue with Prime Minister Mariano Rajoy’s administration. The euro rose towards its resistance area at 1.1830-40 but as long as that barrier remains unbroken, we expect the euro to drop back towards 1.1775 and possible even 1.17.
The British pound touched the lower bound of its current resistance zone ranging from 1.3250 to 1.3220. In short-term time frames we see the cable formatting a potential double top pattern which could predict upcoming bearish momentum, provided that the cable remains below 1.3230. A break below 1.3175 could reignite bearish momentum driving the pair towards 1.3130.
Apart from the FOMC minutes there are no major drivers in the market today. Let us wait to be surprised.
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