It’s all about the reaction to the US CPI data today and how that will set markets up ahead of the Fed decision tomorrow. Traders are pricing in roughly 80% odds of no change to the Fed funds rate at the moment, so will the inflation numbers vindicate that argument? Or will there be a last-minute change of heart before the big day tomorrow?
That reaction will then lend itself to movements in the dollar, bonds, and stocks accordingly. If markets are convinced the data will see the Fed “pause” or “skip”, that should lead to a softer dollar, lower yields, and stronger equities; vice versa.
In particular, keep an eye out on the S&P 500 as it has broken above its August highs and may look towards 4,600 next – at least from a technical point of view. But we’ll see if market sentiment will reaffirm that.
Besides that, EUR/USD is lingering close to 1.0800 with the 100-day moving average at 1.0805 set to be a key focus point. A break above that will see buyers regain a more bullish bias in the pair in search of 1.1000 again.
At the same time, USD/CAD is still continuing to flirt with key trendline resistance around 1.3336 with the loonie failing to breach that level after oil prices plunged yesterday. Then, we also have AUD/USD holding above its own 100-day moving average of 0.6734 currently but faces key resistance around the region of 0.6793-00 next.
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