Fed in Focus; Oil Slides Below $90 - CPT Markets

Market Wrap-up: Markets Turn Cautious Ahead of Fed DecisionMarkets traded with mixed sentiment in the previous session as oil prices plunged more than 7%, while investors shifted their attention to the Federal Reserve's interest rate decision on July 29.

According to the CME FedWatch Tool, around 66% of market participants expect the Fed to leave interest rates unchanged at this meeting, while markets are pricing in a 79% probability of a 25 basis point rate hike in September.

Citadel Securities, however, holds a more hawkish view, expecting the Fed to deliver a 25 basis point rate increase at tomorrow's meeting. Such a move would reinforce Fed Chair Kevin Warsh's anti-inflation credibility, helping contain inflation risks earlier and reducing the need for more aggressive policy tightening later.

The uncertainty ahead of the FOMC meeting continued to support the US Dollar Index, lifting the DXY back to the 101.50 level. The stronger greenback weighed on major currencies and erased gold's earlier gains of nearly 1%.

Meanwhile, geopolitical tensions in the Middle East continued to ease after Iran signaled it would suspend its attacks if the United States maintains its pause in airstrikes. US President Donald Trump also said the two sides were having "good talks" aimed at resolving the regional conflict, while warning that military strikes could resume if negotiations fail.

Crude oil prices fell sharply, with Brent declining 8.7% to settle at $88.36 per barrel, marking its first close below $90 after several sessions. WTI also dropped 7.5% to $82.61 per barrel.

Attention is now shifting toward the Bab el-Mandeb Strait after the Iran-backed Houthi forces in Yemen announced a maritime blockade targeting Saudi Arabia and launched attacks on Saudi oil facilities along the Red Sea coast.

Looking ahead, traders will closely monitor a series of US economic releases, including ADP Weekly Employment Change, Goods Trade Balance, CB Consumer Confidence, and the Richmond Manufacturing Index.

XAU/USD: Gold Erases Gains as Stronger USD Caps Upside 

Key takeaway:

Gold initially gained nearly 1% on July 27 as the sharp decline in oil prices eased inflation concerns ahead of this week's Federal Reserve policy meeting.

Market attention is now firmly focused on the Fed's July 29 policy decision. Beyond the interest rate announcement, investors are also awaiting the US June Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred measure of inflation, for further policy guidance.

Technical Outlook:

Daily Bias: Bullish

Support: 4,044

Resistance: 4,104

WTI: Oil Slides as US-Iran Tensions Ease 

Key takeaway:

Crude oil prices posted a sharp decline at the start of the week after reports that Iran would suspend its attacks if the United States continues its pause in airstrikes, reducing immediate concerns over a broader escalation in the Middle East.

US President Donald Trump also stated that negotiations with Iran regarding the regional conflict were making positive progress.

Market attention is now turning to the Bab el-Mandeb Strait after Yemen's Houthi forces declared a maritime blockade against Saudi Arabia and attacked Saudi oil facilities along the Red Sea.

Technical Outlook:

Daily Bias: Bullish

Support: 81.43

Resistance: 84.61

DXY: US Dollar Climbs Ahead of Fed Decision 

Key takeaway:

The US dollar strengthened despite the sharp decline in oil prices, supported by growing uncertainty ahead of the Federal Reserve's policy decision.

Markets continue to lean toward a September rate hike, although expectations remain divided, with around 40% of investors still anticipating a 25 basis point increase at this week's meeting.

Citadel Securities also expects the Fed to raise rates by 25 basis points at the July 29 policy meeting.

Meanwhile, US Durable Goods Orders rose less than expected in June, with total orders increasing 0.3% to $334.8 billion.

Technical Outlook:

Daily Bias: Bearish

Support: 101.27

Resistance: 101.50

EUR/USD: Euro Holds Near Monthly Lows Before GDP Data 

Key takeaway:

The euro hovered near its monthly lows as bullish positioning in the US dollar paused ahead of the FOMC meeting.

Investors are now awaiting preliminary second quarter GDP figures from both Germany and the Eurozone.

Eurozone GDP is expected to expand by 0.2% quarter on quarter following the previous 0.2% contraction, while annual growth is forecast to accelerate to 0.4% from 0.3%.

Germany's economy is expected to remain flat on a quarterly basis after growing 0.3%, although annual GDP growth is projected to improve to 0.6% from 0.4%.

Technical Outlook:

Daily Bias: Bullish

Support: 1.13620

Resistance: 1.14060

USD/JPY: Japanese Yen Steady Ahead of Fed and BoJ Meetings 

Key takeaway:

The Japanese yen traded broadly unchanged against the US dollar as investors remained focused on the upcoming Federal Reserve policy decision.

In Tokyo, market participants are also awaiting the Bank of Japan's monetary policy announcement on Friday.

The BoJ is widely expected to keep interest rates unchanged at 1% while maintaining a hawkish tone regarding its policy outlook.

Technical Outlook:

Daily Bias: Bearish

Support: 163.40

Resistance: 163.88

Cross-asset price action continues to be driven by expectations surrounding the upcoming Fed decision. The sharp decline in oil prices reflected easing geopolitical risk after signs of progress in US-Iran negotiations, but demand for the US dollar remained firm as investors continued to price in a hawkish Fed path.

The stronger dollar limited upside in gold and kept pressure on major currencies, while equity markets traded with mixed sentiment as positioning remained cautious ahead of the policy announcement.

Attention now turns to upcoming US data, particularly the June PCE inflation report, which could further shape expectations for the Fed's next move.

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