Can the FOMC stop the rot

All eyes are towards the FOMC tonight to see what the Fed says and whether it can instil a bit of confidence back into the markets.

USD/JPY

Range: 77.06-77.83

Support: 76.80

Resistance: 78.30

USD/JPY is now trading back at levels seen last week where official buying was seen from the BoJ. A nervous market saw a wave of AUD/JPY stops executed for retail clients, taking USD/JPY to its lows. Although a sudden spike was seen from 77.10 to 77.85, there were no signs of official intervention with just the usual comments from BoJ’s Shirakawa that the bank are watching the JPY rise with strong concerns. This evening will see today’s main event in regards to the FOMC meeting, with rumors that the Fed will make some sort of announcement now escalating in the current environment although most still favor the Fed to remain in a ‘ wait and see mode ‘. That said, comments on MBS market can’t be ruled out after the GSE downgrades.

EUR/USD

Range: 1.4153 – 1.4247

Support: 1.4150

Resistance: 1.4450

Where would the market be today if the ECB hadn’t decided to buy Italian and Spanish bonds yesterday? The risk sentiment still looks extremely vulnerable, with Asian equities a sea of red after the S&P closed down 6.66% (yesterday was the worst day since December 1, 2008). The market looks to continue with such themes, with S&P futures already having done 1.58% despite a higher than expected Chinese CPI reading of 6.5%. With the ECB having stabilised Italian and Spanish bonds, the concern is that the market will expect them to continue to support and will endeavour to push the ECB’s resolve.

GBP/USD

Range: 1.6268 – 1.6352

Support: 1.6150

Resistance 1.6500

We have second-tier data in the form of industrial and manufacturing production figures, along with trade balance data as we await the main event for sterling tomorrow in regards to the UK inflation report from the BoE. Sterling and the UK seem to be holding up well, with focus on the US and Europe and I expect much of the same today with news outside the UK being the main driver of this market.

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