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Market awaits Powell’s speech

The EURUSD pair closed near the flatline at $1.1726 on Tuesday, September 21.  Price action trended sideways during the session within a range of $1.1715-1.1749.

At the outset of the North American session, Bloomberg wrote that Chinese developer Evergrande missed interest payments due Monday to at least two of its largest bank creditors. Since $85 mln in interest on Evergrande’s offshore US dollar-denominated bond is due on Thursday, the market reacted negatively to the news. Meanwhile, US equity benchmarks held their ground. By the close, the single currency stabilized at $1.1725.

Todays macro agenda (GMT+3)

  • 17:00 US: existing home sales (August); Eurozone: consumer confidence (September)
  • 17:30 US: EIA weekly petroleum status report
  • 21:00 US: FOMC interest rate decision and economic forecast; 12:30 FOMC press conference

Current outlook

The dollar moved lower against most currencies in Asian trading on Wednesday, September 22. Demand for risk-sensitive assets climbed on news from China that Evergrande would make a coupon payment on its domestic bond that falls due on September 23.

The Australian, New Zealand and Canadian dollars all show green on the screen. The single currency and the sterling pared their gains and continue to consolidate at 1.1725 and 1.3650, respectively. As for the British pound, traders are jittery about the upcoming BoE meeting on Thursday and the meeting of the US Federal Reserve on Wednesday. Fed Chair Powell needs to appease the markets today and make it clear that QE tapering will in no way affect the decision to raise interest rates.

Technical analysis

Technically, the euro looks weak. Sellers have been in command of the market since September 4. QE reduction is already priced in, although the specifics of Powell’s dot plot remain to be seen. It makes no sense to hazard a guess at technical analysis, since today the odds of price action in either direction are 50:50. The only thing that looks likely at this point is the price range for sharp price fluctuations: 1.1670-1.1780.

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