Markets are trading nervously ahead of tomorrow’s Federal Open Market Committee meeting, with mild JPY strength and fairly salient GBP and AUD weakness the standout themes for the moment. AUDUSD scraped to an exact test of the lows of 2016, which are in tun. GBPUSD, meanwhile, has probed almost all the way to 1.2500, near the lowest levels since early 2017. These two pairs are showing local divergent momentum (bullish) if the FOMC doesn’t bring immediate further USD weakness, so given the levels these two pairs are trading, very interest to watch USD direction in the wake of tomorrow’s meeting.
The lone trade on our signal tracker list was in good shape earlier today on weakness overnight in AUD triggered by the dovish Reserve Bank of Australia minutes, but Draghi’s dovish broadside and the weak German ZEW survey saw an ugly reversal that has us running for the exit. Breakout signal tracker
We lift the EURAUD short today as two-way volatility risks are significant over tomorrow’s FOMC meeting to say the least, and the intraday reversal is a real disappointment as we were nearing the time window for taking off the trade anyway (standard holding period 7-9 trading days).