Tomorrow evening (European time) the next rate hike from 4.75% to 5.00% is expected from the FED. The situation is very similar to last week's ECB meeting (#137). This time, too, there are voices questioning the rate hike. And this time, too, I expect Powell to raise rates as expected, but to hold a rather dovish press conference afterwards. Ms Lagarde, on the other hand, has not been as dovish as I expected, which has also put pressure on the dollar index (DXY) since last week Thursday.
Whether 25 basis points will be enough to push the dollar back into bullish territory tomorrow night is hard to say. The individual dollar crosses show a rather mixed picture. However, below the next major support level at 102.50, I would be looking to exit dollar longs for the time being.
EURUSD -- 1.0746
The currency pair looks like it is ready to break out to the upside. Above the upper Bollinger band (1.0753) and last week's Wednesday high (1.0760), the 1.0787/1.0800 resistance zone is coming back within reach. Even though a false breakout before or around the FED event cannot be ruled out, shorts above 1.0800 are highly risky.
USDJPY -- 132.37
“The currency pair has reached the 200 dma resistance yesterday and is trading just above that treshold at time of this writing. Actually, the dollar should be shorted here, but it is trading very firm at the moment, which makes things difficult. It is not wrong to wait and see. There is a realistic possibility that there will be another attempt in the direction of 139/140 before it can go down again.” (#135)
The 200-day line was the perfect invitation to short the dollar against the yen. But guess who blew it? Obviously, one should not make it too complicated. In any case, I unfortunately missed this great trade. But at current spot levels and ahead of the FED, it's better to keep your hands off the currency pair. Below the 50 ema (133.86), the short scenario remains valid. Above the mid Bollinger band (134.94), however, I would be cautious with shorts again.
USDCHF -- 0.9267
The dollar is trading quite in the middle of the recent 0.9440/0.9070 range but below the 50 ema (0.9297) with a small upside bias. Short-term support comes in around 0.9240/30. Above the mid Bollinger band (0.9319), shorts are at risk again.
Good luck,
Sebbo