Today marks the beginning of the Fed's two-day meeting, the results of which will be announced on Wednesday evening. Traders will be watching a possible announcement of the fate of the QE program, spot rate forecasts, and macroeconomic forecasts. All QE announcements are expected to be postponed, as the delta factor and weak Nonfarm data deprive the hawks of most of the arguments.

The CFTC report is not informative enough, it shows a stop in the accumulation of a cumulative long position on the US dollar. The growth was observed for two consecutive months, but in September, the volume of the net long position fell below 10 billion, which may reflect investors' uncertainty about the Fed's hawkish bias.

Obviously, the further movement in the currency market will depend on the results of the Fed meeting, which is unlikely to change. The world economy is moving steadily towards stagflation, where inflationary pressures rise and business activity slows down. Labor shortages are key markers of this development, leading to declining production and supply problems and rising wages.

So far, the dominant scenario remains the strengthening of the US dollar amid a decline in PMI indices and a correction in stock markets.

EUR/USD

Inflation growth in the euro area at the level of 1.6% in August coincides with the forecasts and data for July. The ECB has recently refrained from making any comments that could affect the euro exchange rate. First of all, it does not give any guidance on possible changes in monetary policy, but prefers to wait for the results of the meetings of the Fed, the Bank of England and the NBS.

Due to the CFTC report, a small increase in the net long position (+209 billion) can be observed, which reached 4.102 billion. Against the background of the record figures of the beginning of summer, this advantage is insignificant, but it gives reason to assume that the further decline of the EUR/USD pair may stop.

It is also possible that investors are waiting for the results of the elections in Germany. According to polls, the outgoing Merkel will be replaced by the head of the SPD Scholz, who is a supporter of the transformation of the eurozone into the SSE. His plans are in tune with Macron's plans, that is, there is a possibility of creating a powerful coalition to transform the eurozone, which can serve as an impulse for the euro's growth.

Let's assume that the support level of 1.1665 will hold out, the EUR/USD pair will go above 1.1910 by the end of the week, that is, the bullish scenario will be implemented. This scenario looks more likely if we proceed from the fact that investors do not expect active steps from the Fed on Wednesday and are increasingly inclined to believe that the announcement of the start of the QE cut will be postponed to October or November.

GBP/USD

In the previous review, we noted some strange reactions from investors to the publication of updated forecasts and a steady increase in inflation, which was due to outstripping demand for bonds. Last Friday, the publication of the report on retail sales in August partially allowed us to understand why investors are skeptical – sales volume fell by 1.2% yoy instead of the expected growth, that is, there is a clear decline in consumer activity.

At the same time, the bulls are trying to create a platform for growth according to the CFTC report. During the week, the net short position was completely liquidated. Moreover, a long position of +413 million was formed, and the weekly change was +2.526 billion. It is also necessary to note the increase in bond yields. The estimated price is expected to rise.

The BoE meeting will take place immediately after the Fed meeting, and if the Bank of England, guided by the Fed's position, declares the need to exit from a super-soft policy, this may lead to a reversal of the pound up following the settlement price. Let's assume that investors bet on bullish changes by starting a sell-off of bonds and liquidating a short position on futures. If we are right, then the support line in the area of 1.3620/40 will remain unachieved, and the pound will go up from the current levels. It seems logical to buy with a medium-term target of 1.39, and stop just below 1.3600.