(Bloomberg) -- Emerging-market bonds are close to signaling a rally ahead of what’s shaping up to be a pivotal week, with traders standing by for the Federal Reserve’s first policy decision of 2019 and a crucial moment in the U.S.-China trade talks.

A JPMorgan Chase & Co. measure of emerging-market sovereign bond yields is a whisker away from falling below its 200-day moving average, an occurrence that’s heralded gains on all five of the previous occasions it’s broken through such a level since 2008. While the Fed is likely to keep interest rates unchanged on Wednesday following nine hikes since 2015, investors are betting on a dovish tilt from Chairman Jerome Powell.

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“The market will need confirmation of a dovish bias by the Fed to maintain the positive momentum; anything less could lead to a sharp correction,” said Anders Faergemann, a fund manager at PineBridge Investments in London, which has $90 billion in assets. “We dialed up risk earlier in the year to take advantage of higher carry in EM and are looking for a potential reversal in the dollar as the U.S. economy slows down and the Fed pause may turn into a hold.”

A Bloomberg foreign-exchange index that measures carry-trade returns from eight emerging markets, funded by short positions in the dollar, formed a bullish golden cross on Jan. 18 when its 50-day moving average climbed above its 200-day equivalent. The last time this pattern was formed was in March 2017, heralding a 10-month advance in developing-nation currencies.

Investors who have been adding to their emerging-market holdings are also hoping for more evidence of a trade truce when China’s Vice Premier Liu He begins two-day talks with U.S. Trade Representative Robert Lighthizer. But tensions between Washington and Beijing are about to get more complicated, with the World Trade Organization poised to begin an investigation into President Donald Trump’s tariffs on $250 billion of Chinese goods.

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• India is scheduled to present its final budget on Friday before a high-stakes election due by May. Prime Minister Narendra Modi is under pressure to shore up popular support after his Bharatiya Janata Party lost control of key states in polls last month
• “Growth will outweigh fiscal discipline as the Modi administration pushes its way for a second term in the general election,” Prakash Sakpal, an economist at ING Groep NV in Singapore, wrote in a note
  • Persistently weak public finances will keep local government bonds and the Indian rupee under pressure, he said
• The rupee is the worst-performing emerging-market currency this year versus the dollar after the Romanian leu

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• Chile’s central bank will probably boost interest rates on Wednesday as the economy recovers. The peso marked its fourth week of gains
• Hungary’s central bank will probably maintain its hawkish stance at a rate meeting on Tuesday, without announcing the start of tightening just yet, as core price pressures continue to brew
  • Investors expect policy makers to announce the unwinding of unconventional stimulus in March, when the central bank will publish updated economic forecasts
• Kenya, Ghana, Colombia and Ukraine will likely hold rates steady

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