US dollar is trading under slight bearish pressure following the last week’s rally. Markets remain cautious ahead of the Federal Reserve policy decision on Wednesday. The Fed is widely expected to change its forward guidance, opening the way for a rate hike in June. At the same time they will likely sound concerned by the deflationary threat hovering above the economy. We expect the US dollar to remain supported at least before the meeting.
EUR/USD recovered towards 1.0600 on Monday. On Tuesday pay attention to the ZEW economic sentiment indices in Germany and euro zone – forecasts are upbeat. There is a high chance of a bullish correction in EUR/USD, resistance is seen at 1.0650 and 1.0700.
GBP/USD rebounded to 1.4800 after hitting 1.4700 on Friday. Wednesday will likely be a volatile day for the cable: UK labor data, annual budget and meeting minutes in the European session and the Fed’s announcement in the US session.
USD/JPY holds below the last week’s peak of 122 yen and is forming a short-term triangle that will likely be broken to the upside this week. BOJ will hold its policy meeting tonight – no changes in policy are expected now.
Commodity currencies are also in demand: AUD/USD recovered to 0.7650, NZD/USD – to 0.7390. RBA is scheduled to release meeting minutes tonight at 00:30 GMT. We’ll see whether there are hints on a rate cut in the coming meetings or not.