Local data gives way to positioning ahead of tonight’s FOMC meeting

USD lost ground early in the session as investors became wary price action overnight overextended itself on hopes of more QE. But the pull-back in sentiment was not sufficient enough to erase all of the gains at the market open for Asian equities. Price action through the session was fairly lacklustre, with almost all local data being largely ignored in the face of the FOMC meeting tonight. Action in the FX market over the last few days suggests investors are counting on the Fed to expand its balance sheet.

There is no doubt it will be a close call by the Fed, but we think the market is grasping at straws instead of looking at the overall picture. Whilst the recovery in the US has stalled somewhat we do not think the situation is bad enough or the conditions right for the Fed to ease policy. Hence we expect to see broad US gains and general risk aversion.

Throughout the session there was a slew of economic data out of Japan, starting with trade balance figures and ending with the All Industry Activity Index. Japan’s trade deficit increased more than economists were expecting, coming in at JPY -907.3 bn (exp. JPY – 544.4 bn). The increase stemmed from an unexpected jump in imports of 9.3% y/y (exp. 3.3%). Exports, on the other hand, increased pretty much in line with expectations of 10.0% y/y (actual +9.7%). The All Industry Activity Index printed in line with economists’ expectations at +0.1% m/m, representing a slight increase from the prior -0.3%. Nevertheless, with so much focus on tonight’s policy meeting in the US the yen was fairly unmoved by the data. However, positioning early in the session caused a sudden collapse in USDJPY, with the pair sinking around 25 pips in a short period of time.

Also out of Japan were the BOJ’s May meeting minutes. The minutes were pretty much in line with what we were expecting – BOJ members stated what the market already knew, that they were waiting to see the impact of April’s easing before possibly easing again. The minutes don’t provide much guidance in regards to future policy decisions, and it becomes even less useful when we consider that the BOJ loves to move against market expectations.

Elsewhere, price action was muted and cautious. Many investors are likely on the sidelines ahead of tonight’s policy meeting in the US, which is not surprising considering the implications that it may have for price action. USD was sold-off in the early part of the session, but soon most majors started to trade sideways. EURUSD found some support around 1.2658 – 38.2% retracement from the rally that started in the early hours of yesterday morning and ended last night (AEST). It was a similar story for AUDUSD and NZDUSD, despite a significant drop in 1Q dwelling starts and April’s Conference Board Leading Index in Australia (-12.6% and -1.4% respectively).

Источник: Forex.com

20.06.2012