There were no surprises today from the markets as the worlds eyes were focused on the North Korean meeting between Kim Jong Un and president Trump. Despite the quiet behaviour in the markets there was still plenty of data being digested and none more so than US CPI data m/m which came in at 0.2%, in line with expectations. As a result Core y/y CPI was 2.2% as well, in line with expectations, which keeps it above the 2% mark and strengthens the markets case for the FED to keep pushing interest rates in the future. Which is exactly what the markets will be focused on tomorrow as the FED meets to set its interest rates and markets are expecting the FED to be hawkish and push it to 2% from the current 1.75%. The statement afterwards will also be important as traders will want to know the FEDs feelings on interest rates as we could potentially see 3 raises of interest rates this year if the economy booms.
While it’s very hard to trade such fundamental events, there are key currencies that will be in focus here and the USDJPY is certainly one of them. While a traditional safe haven, it’s also very popular with carry traders as well. For me the bulls will be looking good here and the market is currently in a bullish trend as the USDJPY looks to inch up higher to resistance at 111.083. Above this level the next level of resistance can be found at 112.033, but we would need to see a breakout of the key 111.083 level which the bears and bulls have battled in the past. In the event that the statement is weaker than expected and the USDJPY dips then support can be found at 109.347 and 108.721. Though if the bears take control I would be focused on the bullish trend line in play, as this is likely to be a key bouncing point for the markets. All in all, the USDJPY is looking potentially much better in the lead up tomorrow and going forward, as the bulls are certainly looking ambitious.
The other major mover in the sluggish markets today was the NZDUSD which saw some movement on the back of economic data. CPI data for New Zealand showed it being flat for the previous month and before that 0.1%, which certainly puts pressure on the Reserve Bank of New Zealand. While the NZDUSD has been bullish in recent weeks the bears are taking another big swipe on the charts and forcing it back down after resistance at 0.7054 stopped any hope of a total resurgence. Support levels at 0.6966 and 0.6819 are likely to be the main focus for bearish traders looking for key exit points. The 20 day moving average should also be watched as the NZDUSD does look to play of it at times and has previously treated it like dynamic support and resistance.