The USD was well supported by dollar buybacks ahead of the US Interest Rate announcement today. Most markets were quiet with speculation of further Fed easing helping the stock market to small gains. The DJIA was up +45 points closing at 10698 and the S&P up +6 points closing at 1127. Looking ahead, August FOMC meeting forecast to keep rates at 0.25%. The focus will be on the language once again and for any clues as to the degree of further easing via bond purchasing. Further fiscal stimulus however is also a possibility however that would remain a decision for the treasury as opposed to the Fed. Further volatility is expected today given Chinas Trade Balance figures and BOJ target rate decision. USDJPY price action yesterday was between 85.33 and 86.04.

The Euro fell back from the 1.3300 level with the market cautious of being caught long ahead of tonight's major risk event. On a positive note, August European Sentix jumped 9.8 points to 8.5 for the best reading since 2007. EUR/USD traded with a low of 1.3137 and a high of 1.3310. Unless money markets improve one of the main risks facing the European economy is an overdependence on ECB liquidity. Looking ahead, July German CPI is forecast at 0.2% m/m.

Currency to watch out for: EURUSD & USDJPY

  • The EURUSD pivot point is at 1.3225 with a preference to enter into short positions at 1.3215
  • The USDJPY pivot point is at 85.55 with a preference to enter long positions at 86.00

Today's calendar and market movers

  • UK Trade Balance expected at -7.8 bln
  • Canada Housing Starts forecasted at 186.5k
  • Federal Funds Rate expected 0.25%
  • FOMC Statement

Equity Markets

US equities closed positive yesterday with the S&P500 up 0.55%, the DJIA up 0.43% and the NASDAQ up 0.65%. The European bourses were positive with the FTSE up 1.29% the DAX up 1.46% and the CAC up 1.62%. The NIKKEI and the HSI at the time of writing is -0.22% and -1.01% respectively.