European indices fall to fresh session lows
The DAX is now down by over 1% as European indices are seeing red across the board. Adding to that is US futures also falling to fresh lows on the day. S&P 500 futures are down 0.3% while Nasdaq futures are seeing gains trimmed to 0.3% now.
In the currencies space, the dollar is somewhat firmer as it holds a slight advance from earlier following the dip in the euro after ECB Knot's remarks.
EUR/USD continues to flirt with a drop below its 200-hour moving average, though near-term support is still seen around 1.2110-18 for now.
Meanwhile, AUD/USD is also running into a test of its own 200-hour moving average @ 0.7722 as commodity currencies are slightly weaker on the session.
Despite all the push and pull we are seeing so far on the week, the Fed still holds all the cards - especially for the dollar - as we look to round off January trading this week.
Some thoughts on that from earlier:
All eyes are on the Fed but they are largely expected to offer a timely reminder to the market that they won't be changing policy stance any time soon and will look past any expected temporary rise in inflation pressures this year.In short, the statement and Powell's press conference is likely to be somewhat of a repeat from his remarks two weeks ago. In case you missed that:That is likely to reaffirm that the Fed put is well and truly alive and while the straightforward reaction may call for a weaker dollar and stronger risk assets, the market may still want to read between the lines on any remarks about the economy.If the Fed views that economic activity is expected to rebound more strongly in the coming months, that could pose a challenge about what they actually would do as compared to what they say they are going to do instead.For some context, the Fed has never had a good track record of fighting back when being bullied by the market. So, there's that to consider in case.But the simplest case may be that the market will just get swept up by talk of easy money and stick with the game plan through Q1 2021 at the very least.
