Into the new week and the Dollar has rallied. European dealers cited the impending US FOMC meeting as "far too great" an event-risk to ignore and as a result previous USD shorts have been cut while speculators have taken advantage of the perceived higher levels in EUR/USD to build pre-FOMC Dollar longs.
These have been undertaken despite the recent high levels of open speculative positions, they are being driven by the belief that the Fed & the accompanying statement will hold a more hawkish undertone (particularly in regard to the US inflation outlook).
Therefore negating the need for any cuts and fueling the view that the next Fed move will in fact be another hike. As ever - only time will tell. In the short-term, there is little event-risk on the calendar, with only the sporadic ECB comments set to pepper the North American session.
Option players note the expiry today of several 1.2550 strikes, that are now near the current market price. Technicians see a break below 1.2535 as key (with 1.2450/80 then targeted) intraday while sellers into strength are looked for at 1.2565 & 1.2575/85.
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