USDInd, GBPUSD await trio of big risk events

We get the marquee risk event of the week tonight as the FOMC announce their rate decision.

No changes are expected to policy, and no new dots and economic projections are published until mid-December.

It seems the bar for more policy tightening appears to be high at this meeting at least, after Fed Chair Powell and other FOMC officials signalled a preference to keep rates on hold.

Attention will be on any forward guidance and what is needed for another Fed rate hike, as signposted in the current median dot plot for 2023.

The dollar rally has stalled over the past few weeks and could be dependent on whether the Fed explicitly maintains its “higher for longer” bias.

Further gains for the USDInd may first have to contend with immediate resistance at:

• 107.37: this year’s top
   
• 107.12: halfway point of the September 2022 drop

Initial support for USDInd may arrive at its"

• 21-day simple moving average (SMA)
   
• 106.00: psychological level
   
• 50-day SMA a smattering of recent cycle lows.

US Treasury Announcement could cause volatility

There is also some focus on today’s release of the US Treasury's Quarterly Refunding announcement, and the size and the mix of issuance. To those who aren’t fixed-income traders, this can be an event that isn’t too well-known.

But recall that the August refunding announcement caused a bit of a stir, as the Treasury detailed increased auction size in its financing plans which proved to be a key driver behind Treasury yields rising sharply from 4%.

The announcement poses an event risk for the US bond market as it could tighten financial conditions still further and deliver risk-off conditions.

Bank of England on hold again

Thursday brings with it a fairly predictable rate decision from the MPC with the Old Lady set to stand pat. The vote will be of interest after the knife-edge 5:4 split last month to keep rates unchanged at 5.25%.

The data since then hasn’t pushed the dial either for the hawks or the doves with inflation still high but wage growth falling.

Even if policymakers are in agreement that rates should be held at current levels, the policy statement will likely continue to reiterate that "further tightening would be needed if evidence of more persistent inflation pressures is seen".

Looking beyond the upcoming meeting, polling from Reuters suggests that economists expect the first rate cut from the MPC won’t come until at least July.

GBP/USD remains in a bear channel after topping out in mid-July above 1.31.

If "cable" can punch above its 21-day SMA, then bulls will be looking to revisit recent cycle highs at 1.22889 and 1.23375.

The October bottom sits at 1.2037 as perhaps ultimate support, with various recent intraday lows potentially blunting immediate declines.