NY Open: Don't bet on breakouts just yet

The US dollar is in a holding pattern as New York traders await this afternoon’s FOMC policy statement. This trading lull could be an opportunity for nimble, short-term traders.

Many FX majors are flirting with key resistance/support areas and threatening to break out of recent ranges. It seems unlikely to happen this week. EURUSD has been stuck in a 1.1300-1.1500 range for nearly three weeks, and the top of the range is guarded by short-term resistance in the 1.1450-60 area.

Today’s FOMC statement may not trigger any excitement, but it will reinforce expectations for a December hike. The European Union/Italy budget debate appears to be a lose/lose deal for the EU unless Italy makes concessions, which according to Italian Prime Minister Conte won’t happen. The prospect for higher US rates and EU discord suggest a break below 1.1400 would lead to a retest of 1.1340. 

GBPUSD is bid. It has rallied from 1.2695 to 1.3170, in just over a week. The 3.74% rally was fueled by chatter of a pending Brexit deal, which squeezed short positions. Ireland Deputy Prime Minister warned that a UK Cabinet decision shouldn’t be confused with an agreement helped dampen bullish enthusiasm.

Earlier this morning, former Brexit Secretary David Davis predicted Theresa May would lose a Commons vote on her Brexit plan. Those comments and bearish intraday technicals below 1.3130 put the focus on 1.3080 which if broken could extend losses to 1.3030.

Wall Street opened in negative territory. The losses are negligible compared to yesterday’s robust gains. Traders are just being cautious in case of the unlikely event that today’s FOMC statement is surprisingly hawkish, or dovish.