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MTrading Team • 2022-11-02

EURUSD lures buyers as markets prepare for the Fed’s decision

EURUSD lures buyers as markets prepare for the Fed’s decision

Global markets turn dicey, mildly positive, as traders brace for today’s FOMC announcements amid mixed feelings. 

While portraying the mood, the yields remain sluggish and the US stock futures grind higher, which in turn weighs on the US dollar.

With this, prices of gold and crude oil remain firmer whereas Antipodeans struggle to defend the bulls amid fears of higher rates and inflation.

EURUSD tries to remain positive but the USDJPY gains major attention and leads the G10 currency pair’s bullish move versus the US dollar. GBPUSD, on the other hand, stays mostly unchanged amid fresh fears emanating from Brexit and the BOE’s next move.

The prices of BTCUSD and ETHUSD are on the back foot despite positive developments in the crypto field.

Following are the latest moves of the key assets:

  • Brent oil renews three-week high, up 0.85% intraday near $97.50 at the latest.
  • Gold advances for the second consecutive day and crosses $1,650 to print mild gains as we write.
  • USD Index drops to 111.35 while printing 0.20% intraday loss by the press time.
  • FTSE, Euro Stoxx and DAX are all up nearly half a percent at the latest.
  • Wall Street remained in the red for the second consecutive day but the losses were minimal.
  • BTCUSD and ETHUSD are both mildly offered near $20,500 and $1,560 respectively.
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Expectations of slower rate hikes favor sentiment

While RBA and BOC have already retreated from the strong rate hikes, the traders await how the Fed will ease after increasing the benchmark rates by 0.75% in the last few meetings. Even so, the latest comments from the central bankers remain hawkish and hence the fears of recession stay on the table ahead of the key FOMC. The same weigh on the market’s optimism even as China and Japan try to appease traders by conveying their economic optimism, as well as early details of stimulus.

Elsewhere, strong NZ jobs report and mixed Aussie housing data join BOJ Minutes’ defense of easy money to keep the market players on their toes.

As a result, the yields stay inactive after positing the first weekly loss in 11 weeks whereas the US dollar also grinds lower.

Other than the Fed, hawkish comments from the ECB policymakers and talks about a long way from neutral rates at the key central banks also challenge the optimists, as well as prices of commodities and Antipodeans.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETHUSD

⬆️ 🟢 Buy: USD Index, USDCAD, Nasdaq, EURUSD

⬇️ 🔴 Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

All eyes on Fed!

Although the Fed’s 75 bps rate increase is given, the US central bank’s way of defending the hawks and balancing the act of monetary policy normalization by signaling easy rate lifts from December will be crucial to watch during today’s FOMC. Also important will be the early signal for Friday’s US NFP, namely the ADP Employment Change.

Given the likelihood of the Federal Reserve policymakers' dovish hike, the US dollar may witness further downside but it all depends upon the actual decision and hence cautious trading is a must for today.

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