Trader focus has moved over to central banks as this week has progressed and the blue riband event is set to take place towards the end of the trading day on Wednesday with the Federal Open Markets Committee set to make its first-interest rate update under the leadership of new Chairman Kevin Warsh. The market is overwhelmingly expecting rates to remain unchanged in the 3.50%-3.75% range when the decision is announced tomorrow, however traders are expecting plenty of volatility around the statement, press conference and updated dot plots.
Recent data updates have pushed the market to expect the next move from the FOMC to be a hike, after Inflation, as measured by CPI, rose to its highest level in three years last month, while the labour market has continued to show remarkable resilience, with the latest Non-Farm Payrolls report comfortably beating expectations. There were marked splits in the committee’s opinion’s last meeting and analysts are expecting the same this time out with the added dimension of a new Chair in the hot seat having to deliver the forward guidance from the bank in his first post meeting press conference.
Traders are expecting the dollar to see plenty of volatility around the rate announcement and subsequent press conference and Cable is shaping up for a strong move from a technical perspective. Its now sitting close to mid-range and traders are expecting that we could see with side challenged on the event. A more hawkish outlook from the Fed, which would be in line with market thinking, but probably not what the White House would be looking for, should see short-term support around 1.3340 tested and a break there could see annul lows come into focus. Whereas a resilient neutral, or even dovish outlook could see the dollar take a big hit and Cable rally strongly with initial resistance now just above 1.3550.
Resistance 2: 1.3658 – May High
Resistance 1: 1.3573 – Trendline Resistance
Support 1: 1.3322 – Trendline Support
Support 2: 1.3156 – 2026 Low
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