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After the choppy start to the week yesterday, the market is leaning more towards a risk retreat in European morning trade today as equities are softer and that is leading commodity currencies lower at the moment.
The dollar and yen are holding slight gains as such, with the fall in Treasury yields yesterday providing some added tailwind to the latter as well.
The market certainly has a lot to think about now, with lesser confidence about legislation passing in Congress challenging the ongoing backdrop of continued Fed easing. On the latter, the FOMC meeting tomorrow remains the key highlight this week.
So, the moves we're seeing could be tied to some positioning play as the risk rally has remained somewhat unabated since November.
The technicals will continue to provide some added clues on the market bias so we'll see how that shapes up ahead of the Fed tomorrow.
AUD/USD is in retreat today to a one-week low but holding at the overnight drop of 0.7683 for now. Further support in recent weeks is seen closer to 0.7659-66.
GBP/USD sellers are looking to seize near-term control after a bit of ping pong between its key hourly moving averages yesterday, following a retreat below 1.3700.
The pair is now a little under its 200-hour moving average and testing the Friday lows of 1.3635-40 ahead of European trading.
NZD/USD is also in a slight retreat on the softer risk mood, easing to 0.7175 and sitting in between its key hourly moving averages of 0.7170-86 for now.
Elsewhere, gold continues to be dragged through a minor consolidation range to start the week; price action caught around its key hourly moving averages @ $1,850-59 still.
The market will be looking to the Fed for more clues tomorrow but Powell & co. are likely to just reaffirm what we already know to start the new year.
We'll see how the market takes to that but if anything, don't expect the Fed to be anything remotely close to hawkish or less dovish perhaps.
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