Global Markets look forward to cues from Fed - ICICI Bank : Treasury Research

Global markets look forward to US Fed's two-day FOMC meeting that concludes today, for cues on its stance on the pace of asset purchases.

DXY: The DXY index is currently trading slightly higher at around 80.69 compared to yesterday's close of 80.61 as markets keenly await US Fed's monetary policy statement for further cues on its stance on asset purchases. The US Dollar retreated against the Euro yesterday as a lower than expected housing starts data print led to some paring of bets on Fed reducing its asset purchases going ahead. Nevertheless, the US Dollar continues to strengthen against most EM Asian currencies amidst cautious sentiment ahead of the Fed decision. Technically, intraday trend for the DXY is bearish with support and resistance at 80.60 and 81.00 respectively.

The EURUSD cross is trading flat around yesterday's close of 1.3392, holding on to yesterday's 0.2% rise. The Euro has risen by around 0.34% this week, reportedly benefitting from selling in US Treasuries by foreign investors. The common currency also found support as data released yesterday showed that ZEW survey index for economic sentiment rose to 30.6 in June from prior 27.6, signalling increasing optimism over economic recovery. Going ahead, besides FOMC, markets also look forward to Eurozone manufacturing and services PMI estimates due to be released tomorrow. The intraday trend for the Euro is bullish, with support and resistance at 1.3340 and 1.3417 respectively.

The British Pound is trading lower at 1.5629 compared to yesterday's close of 1.5642 amidst broad Dollar strength, extending yesterday's losses. The currency continues to trade weaker despite yesterday's inflation report which showed a higher than expected reading for May, thus putting in doubt the prospects of further QE by the Bank of England. The intra day trend for the GBP/USD cross is bullish, with support and resistance at 1.5600 and 1.5681 respectively.

The Japanese Yen is trading slightly stronger today morning at 95.21, compared to yesterday's close of 95.33, albeit holding on to most of yesterday's 0.9% decline. Today's gains in the Yen have been aided by the trade report which showed that Japan's merchandise trade exports rose by a more-than-expected 10.1% YoY in May. However, further gains in the currency are likely to be limited as the Yen remains weighed down by speculation that the US Fed might taper down its purchases going ahead while the Bank of Japan remains on its path of monetary easing. Technically, the intra day trend for USD/JPY cross is ranged with support at 95.00 and resistance at 96.13.

The Swiss Franc is trading slightly stronger against both the US Dollar and the Euro amidst expectations that the Swiss National Bank, in its policy meeting tomorrow, will refrain from announcing any further measures to weaken the Franc. USD/CHF is currently trading slightly lower at 0.9198, compared to yesterday's close of 0.9202, extending yesterday's decline. Similarly, EUR/CHF is also lower at 1.2317 compared to yesterday's close of 1.2325. Technically, USD/CHF is expected to trade bearish with support at 0.9172 and resistance at 0.9240.

The Australian Dollar is trading weaker today morning around 0.9485 compared to previous close of 0.9574, extending its decline for the fourth consecutive session, amidst broad-based caution ahead of the US FOMC policy, due later today. Further, CFTC data suggests that traders have increased their short Aussie positions. However, a higher than prior reading of the Westpac Leading Index for May, released earlier today, is likely to provide some support to the Aussie. Technically, we expect AUD/USD to trade ranged with support at 0.9435 and resistance at 0.9520.

The Canadian Dollar is trading weaker around 1.0226 levels, vs. yesterday's close of 1.0212, extending yesterday's losses. Caution ahead of the US FOMC policy outcome, due later today, is likely to keep the currency under pressure. Meanwhile, in yesterday's trade, the Loonie declined by 0.35%. A rise in prices of North American crude oil, one of Canada's largest exports, failed to support the currency. The Fed policy outcome is likely to guide further moves in the currency pair. Markets will also look for cues from the new Bank of Canada governor Poloz's first official speech, due tomorrow. Technically, we expect USD/CAD to trade bearish with support at 1.0200 and resistance at 1.0266.

Source : Equity Bulls

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