Range or Break for the Almighty Buck

This week has begun with some semblance of a fire brewing over two different themes in the Forex and financial markets. What is the US Dollar’s bearing post FOMC? Is the yen finding its way after the BOJ stimulus twist? While both are experiencing some volatility, most of their trading partners in the Forex world are holding steady near technical boundaries. Traders are still contending with a Forex market that is struggling to find follow-through amid a lot of complacency. Sentiment and monetary policy is likely to shape short-term volatility but the wider market trend may be well beyond reach as there is risk and sentiment on the horizon.

For the US Dollar index, the Dow Jones Industrial Average and the ICE, there is very little effort among them to break out of their current trading ranges. This leads us to ask technical questions of some major Dollar trading partners who are near technical boundaries. On one hand, these Forex pairs are near key support levels: USD/JPY and the AUD/USD. On the other hand these Forex pairs are near key resistance levels: GBP/USD and USD/CAD (near Dollar resistance levels). The dominant fundamentals are geared towards to interest rate expectations, which could change directions in these particular markets. The markets have already gotten two of the 14 Fed speeches this week and there is a better than half a chance the Fed will raise rates in December, this leaves a lot of room for traders to change their minds with positioning. As for the Japanese yen, there is a lot of debate over the credibility of the BOJ which is overriding confidence in their ever expanding monetary policy programs. Confusion is likely to continue and drive the relevant yen crosses. The Yen is trading near the 100 level at 100.66.

Looking outside the universe of risk trends and monetary policy, the British Pound and Oil are giving traders some diversity. However, they remain consolidative, thanks to Brexit and the upcoming OPEC decision on capping oil production. The oil cartel is currently meeting in Algiers trying to agree on curtailing production. However a lot of room remains between Iran and Saudi Arabia. Both countries are on the opposite ends of proxy wars in Syria and Yemen. As far as the Pound is concerned, there are companies that will move their headquarters out of the United Kingdom. This will dampen a post Brexit recovery for the UK. This should be bearish for the following Pound Forex pairs: GBP/USD, EUR/GBP and GBP/NZD.