US FOMC Policy Meeting, BOE Rate Decision & Big Data Week for Japan

As we move into another week, there are several key events to keep on your radar. As usual, these are the top events most likely to determine price action and trends this week. 

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US Dollar

March 16th, 2021 – 12:30 GMT

Wall Street will closely watch the US retail sales report. Last month, stimulus checks assisted customers in making significant purchases. According to the most recent retail sales survey, spending slowed in February. If consumer spending remains high, Treasury yields could rise as a result.

March 16th, 2021 – 17:00 GMT

Also, on Tuesday, bond watchers will be paying close attention to the 20-year bond auction. A lack of demand may be a catalyst for much higher Treasury yields.

March 17th, 2021 – 18:00 GMT

The FOMC policy meeting will be the key event of the trading week. The United States’ economic recovery is picking up momentum, and inflation worries are starting to surface. Any upbeat remarks about the economy would almost certainly push rate hike expectations ahead.

British Pound

March 18th, 2021 – 12:00 GMT

On Thursday, the Bank of England will hold its policy meeting, with the Official Bank Rate forecast to remain at 0.10%. 

The bank is expected to keep its asset purchase program at £895 billion, but it will be cautious about being too ambitious and will instead concentrate on the risks to the outlook. 

The Bank of England needs flexibility in its bond-buying program as the UK experiences the worst economic downturn in 300 years.

Japanese Yen

March 19th, 2021 – 03:00 GMT

Machinery Orders, Industrial Production, Inflation, and the Tankan Survey are all part of Japan’s big data week. On Friday, however, all eyes will be on the Bank of Japan meeting. Markets will be searching for a better description of the BOJ’s upper tolerance for JGB yields (conveniently after the FOMC).

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AUD/USD struggles to justify trade-positive headlines amid broad USD strength

Despite news of Chinese goodwill gestures to safeguard the US-China deal, AUD/USD remains below 0.6800 by the press time of early Wednesday.

The Aussie pair initially popped to day’s high of 0.6805 on the South China Morning Post (SCMP) news that China is looking to buy more agricultural products from the US after President Donald Trump signaled readiness to reject bad deal at the United Nations General Assembly (UNGA). Also supporting the optimism was a headline that profits of China’s state-owned companies rose 6.1% YoY.

However, the quote refrains from further upside as the US Dollar (USD) remains as bulls’ favorite amid political challenges to the US. Among them, inquiry to impeach the US President Trump and the US-Iran tension seems to acquire the front-line. Further, China’s Foreign Minister Wang Yi fired some worrisome statements indirectly the US to not interfere in the affairs relating to Hong Kong also push investor towards the greenback.

AUD/USD struggles to gain traction amid USD strength, trades around 0.6760

The AUD/USD pair lost 40 pips on Wednesday pressured by the broad-based USD strength and touched its lowest level in three weeks at 0.6740. Although the Greenback preserves its strength ahead of key macroeconomic data releases from the United States (US), the pair seems to be posting modest recovery gains. As of writing, the pair was up 0.2% on the day at 0.6765.

AUD capitalizes on renewed trade optimism

Heightened optimism about the US and China making forwards progress in trade talks in October seems to be providing a boost to trade-sensitive antipodeans such as the Aussie. Earlier today, Chinese Commerce Ministry Spokesman Gao told reporters that the US and China were in close contact to prepare for the high-level talks that will take place in Washington next month. “Sides are preparing for making progress for trade negotiations,” Gao added.

XAU/USD tumbles to $1500 on USD strength

Gold prices are sharply lower on Wednesday, on the back of a rally of the US Dollar across the board. Price traded near multi-week highs earlier today above $1,535/oz and currently stands at $1,506 under pressure. 

The Greenback is higher despite political jitters in Washington. Today US President Trump released the transcript from his conversation with Ukrainian President. Later he mentioned that a deal with China could come sooner than “what you think”. US data may have also contributed to the strength seen in the US Dollar as New Home Sales jumped in August. Another key factor behind are higher US yields. 

Other safe-haven assets like the Swiss Franc and the Japanese Yen are falling versus the US dollar, but not as much as Gold. 

XAU/USD testing $1500

The yellow metal bottomed exactly at $1,500 before bouncing modestly to the upside. It is down almost 2% but so far holding on top of the mentioned area. The chart points to the downside as price dropped back under the 20-day moving average, also breaking a short-term uptrend line. 

A consolidation below $1,500 could lead to more losses. The next support might be located at $1,492 followed by the September low at $1,482. Now, $1,510 is the immediate resistance followed by $1,515 (Sep 24 low) and $1,524.