Cable Streak Continues, Fed Next

Markets were predictably less-volatile ahead of Wednesday's FOMC decision. The pound was the top performer while the euro lagged but the changes were modest. Japanese May trade data is next but the Fed is the main driver.  Ashraf's GBPUSD Premium long is 20 pips away from hitting it's final target following the 1.5330 entry on June 8 (370 pips). EURUSD, EURCAD and AUDNZD Premium trades are also in progress and I  the green.

Ranges were tight Tuesday but a few trends held up. Cable was higher for the sixth time in seven sessions and finished near the highs of the day at 1.5646. The euro fell to 1.1205 in early US trading as Greece caused some worries but, once again, dip buyers appeared to bid the pair to 1.1245.

The top news item was US housing starts and it was mildly disappointing at 1039K compared to 1090K expected but it was coupled with positive revisions and building permits jumped to the highest since the crisis.

The kiwi hit some selling as dairy prices fell another 1.3% in the latest Fonterra auction but ranges in the commodity currencies were narrow.

Most of the market chatter surrounded the Fed. Economists view September as the most-likely date for a hike but the Fed Funds market only sees that as about a 65% probability. The chatter about the liftoff date is deafening but the pace of hikes and communication on the economy is equally important.

Look for the dot plot to indicate a slower pace of hikes and a lower terminal top. That will go some ways towards mitigating anything that's especially hawkish in the statement. However, the Fed has grown comfortable with data dependency and that tone will almost-certainly continue.

Before the Fed, the focus is on Japan and May trade balance at 2350 GMT. An adjusted trade balance of 184B yen is expected but growth in exports is equally important. The consensus is for a 3.0% y/y rise.

The big surprise of the first half of 2015 has been the strength in the Japanese economy. Economists remain skeptical but another strong trade report would help quiet the critics and may spur modest yen buying.