Which Way Will the FOMC Pendulum Swing?

Fundamentals

As we already noted, among yesterday’s fundamental news the US PPI came out – no surprises here, everything as forecast – 0% for the month, a little better in annual terms – 2.4%. There were no serious movements on the news front – the euro lost about 10 points, but later recovered, resuming its sideways movement.
Today is the 0 hour. “Will it or won’t it go up?” That’s the question swirling in the minds of millions of traders who will be monitoring the FOMC meeting and the decision on the base interest rate. Since prices may incorporate the toughening of Yellen’s policy, it is quite possible that we’ll see directly opposite movement if the Fed decides to raise the rate by 25 basis points, i.e., to 1.25%. Technically, the next step in the EUR/USD pair is 100 pip, to 1.1300. Whether the news will prompt this move or the scenario will not pan out will be clear at 6:00 pm GMT.
Until the Fed decides, traders will trade on UK unemployment at 8:30 am GMT and the US CPI at 12:30 pm GMT, which, by the way, might add some volatility to the US currency, again encouraging speculation on the monetary authorities’ next moves.

Stocks

No significant corporate news was published today. The Dow Jones hit a new high on the daily charts, absolutely refusing to fall, even for a technical correction. The US stock market remains a green pasture for the bulls but, as we noted yesterday – the first red flags, e.g., a drop in Apple’s market cap, are already flying.
The Russian stock market is weak. After touching the resistance line in the form of the 9-day EMA at 1880 points, the MICEX Index headed farther down. When will it end? Presumably we’ll be able to see 1830, where the lower Bollinger Band is located (a support, albeit a weak one). The graphic lower boundary of the price channel on the monthly time frames looks more reasonable. The MACD is still diverging, which hints at a reversal. Theoretically, the hints might end on Friday, when the Bank of Russia decides on its base interest rate. Then the stock market might be more attractive, but since it will also be the end of the week, the bears will understand that they’ll have to close their shorts. We therefore just might expect a technical rebound. Whether the rebound will turn into a short-term trend reversal remains to be seen.

Currency Market

Technically the AUS/CAN pair is in a lateral trend with fairly wide boundaries – 0.9930 – 1.0300 on the daily charts. According to Elliott’s wave theory, the pair just might be in a flat correction. If this is the case, the internal structure has to be 3-3-5. Bearing in mind signals amid the breakthrough of the 9-day EMA and confirmation in the form of the intersection of the MACD and signal line, traders will likely prefer to trade mostly downward - right down to the lower boundary, where positions quite possibly will be reversed.
The pound continues to fall significantly against the New Zealand dollar. Technically, on the daily time frames the bears are trying to break through 1.7620, where a 61.8% correction is located. If they succeed, the next target will be 1.7260, and the bears have every chance, especially given the situation in the UK related to Theresa May’s possible resignation and worsening macroeconomic indicators.

Nikolay Dudchenko, Olymp Trade analyst

Olymp Trade Review