Market Update – July 25, 2017

Market Update – July 25, 2017

The Forex market moves in a typical summer trading mode: the Asian sessions are very slow and only economic news matters. That’s normal for July.

 

But this doesn’t mean we won’t see any movement this week. There are two potential events that may move the market. Both of them from the United States.

 

FOMC in Focus

 

Tomorrow, the FOMC will release the statement and all eyes are on the dollar. The market prices in no changes from an interest rate point of view.

 

But you won’t know how the market will truly react. If you remember, the last two rate hikes from the Fed were met with dollar selling across the board.

 

This time there will be no press conference to follow the FOMC release. As such, chances that the Fed will hike rates are quite small. Moreover, it is unlikely the USD will stay so low. I mean, the interest rate differential between the dollar and the other major currencies is growing by the day.

 

Only Bank of Canada lifted the interest rate. The rest, starting with the ECB and continuing with the BOE and RBA, simply did nothing. In the meantime, the Fed hiked the rates multiple times.

 

US Advance GDP on Friday

 

Next Friday we’ll find out the true state of the US economy. GDP (Gross Domestic Product – shows the total value of the goods and services an economy produces) will be released. Because this is the Advanced number, it tends to be the most volatile one.

 

Traders will look to see if the recent IMF downgrade of the US economy will be confirmed. If not, look for the dollar to start gaining some.

 

The Forex Price Action

 

Recently, the Forex price action was a one-way street: a lower dollar. Even the GBP managed to climb above the all-important 1.30 psychological level. But, at the current level, the dollar looks interesting.

 

The AUDUSD was one of the biggest movers. It seems like the market dies to break above 0.80. RBA did help. The wording around the latest policy was clearly hawkish.

 

Conclusion

 

While summer trading conditions dominate, the market still looks for a reason to dump the USD. At the moment of this writing, the EURUSD just broke above 1.17. This is a 2-year high on the pair, and bulls only want to push the pair higher.

 

However, this week’s data is decisive. Look for volatility to increase as we approach the two releases.

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