Daily FX Wrap: charting broad technical lines before plotting through Fed dots

DXY

A mild bid has lifted the index and broad Usd off lows just a few hours before the FOMC and an almost universally expected 25 bp rate hike. However, the tone of the accompanying statement, SEP and dot plots will determine whether this is merely hedging for a hawkish outcome and short covering or another dead cat bounce. The DXY is nudging 94.400 vs just over 94.000 at one stage.

CHF

The Franc has emerged as the clear G10 underperformer over the course of Wednesday’s EU session, and a downbeat Swiss ZEW survey may have contributed belatedly, although Usd/Chf’s climb towards 0.9700 could be more on the SNB vs Fed policy divergence angle, while Eur/Chf extending its rebound above 1.1350 came after more assurances from the Italian Government over the 2019 budget and trying to keep the deficit in check.

EUR

Another major currency to succumb to increased selling pressure and retreating further from recent peaks against the Greenback, but not quite far enough to trigger heavy option expiries from 1.1725-35 (2 bn) having been capped ahead of a key Fib at the opposite end of the range. Note, the Eur also lost ground vs the NOK and SEK on the ECB against Scandi Central Bank outlook at least in part.

CAD/GBP

Both moderately softer vs the Usd, with the Loonie slipping below 1.2950 amidst more NAFTA headlines suggesting that a deal remains elusive, while the Pound faced yet more Brexit commentary that veered from positive to negative on prospects for a deal. Cable did bounce just a head of tech support around 1.3136 (Fib level) and held above 1.3150 for the most part, but failed to retest 1.3200.

JPY/AUD/NZD

All relatively resilient, with the Jpy managing to withstand bearish end of September/Q3/Japanese half year end bank rebalancing signals and another pretty severe test of bids/stops around 113.00 vs the Usd and decent option expiries from 112.95-113.00, while the Aud kept in contact with the 0.7250 level and a 1.1 bn expiry between there and 0.7255. The Kiwi derived support from a sharp rebound in NZ business sentiment overnight having baulked at a wider than forecast trade gap earlier, and is now eyeing the Fed before the RBNZ with no change in the OCR anticipated, but the chance of a less dovish tweak to guidance and/or the latest economic assessment – Nzd/Usd hovering just below 0.6650.

EM

3 from the last 3 for the CNB in terms of ¼ point tightening moves, and options left open for another at November’s policy meeting, or early 2019 if not – Eur/Czk slightly firmer after some choppy moves circa 25.6750. Elsewhere, Try and Zar still outperforming, former post-latest CBRT independence claims via the Finance Minister and latter ahead of SA President Ramaphosa.

(RANsquawk)