US DOLLAR LITTLE CHANGED AHEAD OF FOMC DECISION

The US dollar was little changed against a basket of other major currencies Wednesday, as traders awaited the outcome of the Federal Open Market Committee (FOMC) policy meeting, which will almost assuredly end with a rate hike.

The dollar index, a weighted average of the greenback against a basket of the euro, pound, yen, Swiss franc, Canadian dollar and Swedish krona, was last seen trading at 97.04. It fluctuated within a narrow range of 96.86 and 97.06 during European trade.

The greenback edged higher against the pound after the UK government posted mixed employment data. The number of Britons applying for unemployment benefits rose by 7,300 last month, the Office for National Statistics reported Wednesday. Analysts in a median estimate forecast a gain of 10,000.

However, average hourly earnings excluding bonus rose just 1.7% in annually in the three months through April, well below forecasts of 2%.

The euro held its ground after Eurostat reported a strong pick-up in industrial production. Factory output in the 19-member euro area increased 0.5% in April and 1.4% annually, official data showed.

Meanwhile, Australian consumer confidence declined in June, according to a private survey. The Westpac-Melbourne Institute index of consumer sentiment fell 1.8%, its third consecutive monthly drop.

Fresh data from China also confirmed steady expansion for the world’s second-largest economy. Chinese industrial production rose at a faster than expected 6.5% in the 12 months through May, the National Bureau of Statistics reported Wednesday. Retail sales – a proxy for consumer and government spending – climbed 10.7% over the same period, also higher than expected.

The Urban investment was the lone disappointment with the growth of just 8.6% annually in the first five months of 2017.

The Australian dollar, which takes cues from both domestic and Chinese data, surged through the overnight session to trade at nearly two-month highs.  

EUR/USD

The euro held within a narrow range in anticipation of the Fed announcement later in the day. It remains in an ascending channel on the 4-hour, daily and weekly charts, signaling a continued upside over longer-term horizons. The EUR/USD is eyeing a technical resistance of 1.1230; a break above that level would expose the 1.1280 resistance.

GBP/USD

The British pound declined 0.2% against the greenback ahead of North American trading. The GBP/USD broke below a key hourly support, a possibly bearish signal. Long-term, the outlook is more negative as the pound awaits conclusive Brexit negotiations.

AUD/USD

The AUD/USD broke to the upside on Wednesday, overcoming a key technical resistance on route to nearly two-month highs. The Aussie currency was up 0.6% at 0.7586. The AUD/USD is now on track for a re-test of the 0.77 level. In determining entry points, traders should keep an eye on gold prices, as the Australian dollar is strongly correlated with the yellow metal.