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Markets preparing for an eventful FOMC meeting

July 27, 2020 By Mircea Vasiu

Financial markets gear-up ahead of an important week ahead marked by the FOMC meeting and press conference. The USD declines across the board, and the US stock market seems unable to keep the bullish tone seen recently, making a difficult time for the Fed to communicate its next steps.

On top of that, several important economic releases are worth watching as they will add to the market’s volatility. Finally, after Tesla and Amazon earnings last week, this time it is Amazon, Apple, Facebook, and Google turn to release their earnings.

What to Look for in the Week Ahead

The week starts on a slow note as the London session does not have any relevant economic data scheduled on Monday. Also, the American session will focus on the stock market as only Durable Goods orders are set for release at the start of the session.

Consumer Confidence in the United States and the CPI (Consumer Price Index) in Australia will move the USD and the AUD on Tuesday. However, do not expect decisive price action as investors will not take a chance ahead of the Fed announcement on Wednesday.

Wednesday is likely to be marked by the Fed’s announcement. The market expects nothing new from the Fed, but this does not mean that volatility will not be present. As always, when there is a press conference following the announcement, surprises may appear, especially on the questions and answers part.

This week is marked by the big tech companies in the United States reporting their Q2 2020 earnings. Apple, Google, Amazon, Facebook – they are responsible for much of the US stock market rally seen in the COVID-19 pandemic, and their stock price is closely watched by investors of all sorts.

Not only stock market traders have an interest in these companies, but currency traders too. For example, a combined miss on expectations from the big tech would likely sell Nasdaq lower. This, in turn, triggers lower AUDUSD as the pair correlates directly with the US stock market. Moreover, lower stock market prices would trigger higher EURAUD and lower USDJPY.

The German, American, and Canadian GDP data end the trading week, as they highlight Thursday and Friday economic releases. All in all, expect a week dominated by ranges until the Fed event is behind, and then the focus shifts to the US earnings.