• Will the US retail sales later mess up the Fed odds even more?
• Dollar holds lightly changed on the day
• Gold rally stalls as traders wait on Fed decision
• Germany September ZEW survey current conditions -84.5 vs -80.0 expected
• European indices hold higher to start the day
• What are the main events for today?
• Eurostoxx futures +0.5% in early European trading
• FX option expiries for 17 September 10am New York cut
• A light one on the agenda in Europe today
• The bond market stays in focus in run up to the Fed tomorrow
• New Zealand Treasury see more positive data, but no firm sign of a recovery just yet

Markets:

• AUD leads, CAD lags on the day
• European equities higher;
  S&P 500 futures up 0.24%
• US 10-year yields flat at
  3.618%
• Gold
  down 0.29% to $2,575
• WTI
  crude up 0.20% to $70.23
• Bitcoin
  up 1.49% to $59,069

It’s been a
quiet session with no major news releases. The only economic report was the
German ZEW which missed expectations by a big margin.

In the
markets, the mood is tentatively positive as risk assets continue to gain as we
head into the FOMC decision tomorrow. The probability for a 50 bps cut stands
now around 65%.

In the
American session, we get the US Retail Sales and the US Industrial Production
data. If we get weak readings, then the market will likely seal the 50 bps cut
with a 70%+ probability. In case the data comes out strong though, it’s
unlikely that we will see much change in the pricing although we should get closer to a 50/50 chance.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Last month, July retail sales nudged up by 1.0% and beat estimates here. Ten out of the thirteen categories showed an increase, so that helped. But this time around, the estimate is for headline retail sales to show a 0.2% decline. That said, ex-autos is estimated to increase by 0.2% and the more important control group is expected to be higher by 0.3% again.

The hurdle doesn’t seem too high but spending might cool a little after the hotter-than-expected July performance. That especially as we are starting to build towards the holiday spending spree in the months ahead.

In any case, it’s not so much about the details of the data at this point. This is a market that is currently trending high on emotions ever since the whole carry trade fiasco at the end of July and start of August.

And in pricing in higher odds of a 50 bps move by the Fed since last week, it looks like traders are very much caught in that again.

As such, I would argue that the risks are asymmetric when it comes to the US retail sales today.

If the report is a poor one, it would just serve to exacerbate calls for a 50 bps rate cut tomorrow. That considering market players are wanting to try and force that on the Fed, or so it would seem.

But if the report is relatively in line with estimates and even perhaps showing that spending is doing fine, markets are likely to take that as a „carry on as you will“ message. There might be some minor adjustments to the current pricing in favour of 25 bps but surely we won’t go as far as to pricing out the possibility of a 50 bps move.

Timiraos‘ report last week certainly threw a curveball to markets. The Fed communique since Jackson Hole has been siding with a 25 bps move. But then now, traders have had to rethink whether 50 bps should still be in the picture.

And when you give traders an inch, they’ll happily take a mile. Even more so if they can lean on the data to back that up.

Either way, a poor report today will certainly make things very, very interesting going into tomorrow. That especially given the current market pricing. It will make this one of the most anticipated and watched Fed meetings in recent times.

This article was written by Justin Low at www.forexlive.com.

Fundamental
Overview

Last Thursday, WSJ’s
Timiraos published an article which seemed suggesting that a 50 bps cut was
still being discussed. The market responded by raising 50 bps cut probabilities
to around 40% from 13% before the news.

Nick Timiraos is considered
a Fed “insider”, so the market is attentive to all of his pieces concerning
potential Fed decisions. Since then, the 50 bps camp got more vocal and the
probability for the Fed to cut by 50 bps at the upcoming meeting stands now
around 70% with a total of 120 bps of easing by year-end.

This repricing weakened the
US Dollar across the board as Treasury yields fell further. Once we are done
with the Fed decision though, the focus will switch back to the economic data.
In case we start to see better figures, the market might start to pare back the
aggressive easing expected in 2025 supporting the greenback in the short-term.

For the RBA, the market
sees a 91% probability of no change at the upcoming meeting and a total of 21
bps of easing by year-end. The central bank keeps its fairly hawkish stance as
inflation has been slow to return inside the target range and the labour market
remains resilient.

AUDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that AUDUSD bounced around the 0.6650 level and eventually rallied back
above the key 0.67 resistance increasing the bullish momentum.
The target for the buyers should now be the 0.68 handle where we can expect the
sellers to step in with a defined risk above the level to position for a drop
back into the 0.67 handle.

AUDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the bullish momentum increase as the price broke above the 0.67 resistance
and the trendline
as more buyers piled in while the sellers squared their positions. There’s not
much else to glean from this timeframe, so we need to zoom in to see some more
details.

AUDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have an upward trendline defining the current bullish momentum. The
buyers will likely keep on leaning on the trendline to position for more
upside, while the sellers will look for a break lower to pile in for a drop
back into the 0.67 level. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we get the US Retail Sales and the US Industrial Production data.
Tomorrow, we have the FOMC Rate Decision. On Thursday, we get the Australian Labour
Market report and the latest US Jobless Claims figures.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

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This article was written by FL Contributors at www.forexlive.com.

The changes among the day remain light, with dollar pairs all holding within 10 pips change currently. It’s just one of those days where even if there are any moves, one shouldn’t look too much into it. At this point, it’s all about the Fed tomorrow.

USD/JPY was a bit more volatile in Asia, trading up to 141.25 but is now flat at 140.60. Meanwhile, EUR/USD saw a light extension of its range earlier to 1.1146 but is now flat again around 1.1135. So, there’s not really a whole lot to talk about in terms of the movement today.

In the equities space though, US futures are pushing higher with tech shares seen rebounding. S&P 500 futures are up 0.4% with Nasdaq futures up 0.6% currently. In the bond market, 2-year yields remain on edge at 3.556% and 10-year yields down marginally on the day at 3.614%.

As for Fed pricing, traders are still seeing ~67% odds of a 50 bps rate cut currently.

This article was written by Justin Low at www.forexlive.com.