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U.S. Dollar Remains On Solid Footing After Fed Decision

To sum up, yesterday’s FOMC announcement was hawkish enough to keep the U.S. dollar on a strong footing, even though big market movements were lacking. In terms of a first rate hike, Federal Reserve officials are now evenly split on whether or not it will be appropriate to begin raising rates as soon as next year. The market continued to price in a first hike around the start of 2023, an assumption that can be considered less hawkish and which has led to a very small sell-off in the greenback at the time when projections were released.

The dollar gained back ground around the time of the press conference with Fed Chair Jerome Powell saying the central bank could begin scaling back asset purchases in November and complete the process by mid-2022. This was the hint on tapering the market has expected.

As for fears over an economic collapse in China, Powell spoke on the Evergrande situation during his press conference but he does not expect any spillover into global markets. Market participants will now be looking to see if Evergrande makes its next debt payment which totals $83.5 million.

The next central bank decision is around the corner with the Bank of England monetary policy announcement due at 11:00 UTC today.

While risks are tilted for a hawkish outcome for the BoE meeting, there is a concern that markets may be overly optimistic amid the recent increase in rate hike calls by analysts. A rate increase is seen by May 22.

In the GBP/USD we continue to look at a price range between 1.39 and 1.3550 and bear in mind that the pair is still oversold making it vulnerable for corrections.

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No Big Movements For Traders

The FOMC statement came in with a somewhat hawkish tone, stating that policymakers are closer to tapering. Federal Reserve Chair Jerome Powell’s press conference, however, depressed the U.S. dollar in the aftermath of the statement as he said that there was still some way to go. While no decision on taper timing had been made, Powell said officials “expect further progress” but they are “clearly a ways away” from liftoff. Economists now expect that a reduction in asset purchases (taper) will not happen until early 2022.

The next gathering of the FOMC is September 21-22 but before that, Powell will speak at the August 26-28 conference in Jackson Hole. Fed chairs have sometimes used the venue to signal policy shifts.

As for day trades there was nothing to gain yesterday with momentum in the Forex market still lacking. We therefore recommend traders staying on the sidelines during these low-liquidity periods, taking a break from the markets and adjusting risk exposure. Better trading conditions will come after the summer doldrums.

Traders will watch the U.S. GDP data today at 12:30 UTC but chances of big market moves are small.

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Euro And Pound Rise to Fresh Highs

The euro and pound rose to their highest levels in over two years amid Brexit hopes and a weakening U.S. dollar.

The euro briefly rose above 1.22 for the first time since April 2018 but could not hold onto its gains in a first bullish test. Today, we see the pair again above 1.22 which is why we anticipate further gains. A next hurdle comes in at around 1.2230 and if the euro is able to overcome that small obstacle it could be primed for a test of 1.23. A current support is seen at 1.2140.

Sterling rose to a high of 1.3555, its strongest level since May 2018 but corrected some gains before stabilizing above 1.35. Traders expect further gains amid optimism that the U.K. and the EU are close to strike a last-minute deal.

The focus will be on today’s Bank of England monetary policy decision but no changes are expected which is why the market’s reaction could be muted.

The U.S. dollar on the other side was broadly lower before yesterday’s FOMC statement but gained some traction as the Fed statement neared. Fed Chair Jerome Powell cooled any hawkish expectations in the news conference and stated that markets will receive warning before the Federal Reserve makes significant changes to asset-purchases. This was the confirmation traders needed to sell dollars again.

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USD Crashes Post FOMC; Euro Trades Surprisingly Resilient

Dear Traders,

The FOMC statement sent the U.S. dollar into a tailspin and drove other major currencies to fresh highs. While the Federal Reserve’s monetary policy announcement came in as expected, the market interpreted it as dovish. The reason was that, the policy statement contained too much concern over inflation to give the dollar a boost. While the Fed indicated that it would start unwinding its balance sheet “relatively soon”, a change in language from “later this year” in the June statement, it said inflation remains below the central bank’s 2 percent target even as near-term risks to the economic outlook appear balanced. That fueled speculation the Fed won’t rush to raise interest rates.

The dollar fell sharply post FOMC and pushed the euro and British pound to new highs. EUR/USD hit a fresh 2-year high on the way to 1.18 while GBP/USD broke above 1.31. Given the strong uptrend, bulls might tend to extend gains to 1.18 in the euro and 1.32 in the cable. Nonetheless, we bear in mind that EUR/USD and GBP/USD are in lofty highs, the risk for stronger pullbacks is thus increased.

U.S. Durable Goods Orders are scheduled for release at 12:30 UTC and could have a short-term impact on the greenback.

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Copyright © All Rights Reserved 2017 Maimar-FX.

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Hawkish Fed Surprises

Dear Traders,

Incredible but true: The U.S. dollar finally ended the trading day unchanged against the euro and British pound after it came under strong selling pressure following the weak U.S. inflation report. Market participants sold dollars ahead of the FOMC decision on speculation the Fed could forgo raising interest rates again this year. Weaker than anticipated inflation figures have led to the assumption the Fed may grow less hawkish but the opposite happened. The Fed statement was overly hawkish with Fed Chair Janet Yellen noting that the Fed continues to see conditions favorable in place for inflation to rise. Policy makers maintained their outlook for one more hike in 2017 and set out some details of the central bank’s plans to reduce its balance sheet. While U.S. economic data came in on the negative side most recently, it is difficult for the market to trust more the Fed’s rhetoric than the current data output. This fact limited the greenback’s strength and led to an almost unchanged picture.

We went long in both currency pairs EUR/USD and GBP/USD ahead of the Fed statement but gains were limited to smaller targets with the upward trend failing to be sustained.

The euro reversed shy of 1.13 and preferred trending around 1.12. As long as there is no sustained breakout either above 1.1285 or below 1.11, the technical picture in the EUR/USD remains unchanged favoring a sideways trend.

The cable took a glimpse above 1.28 but was unable to hold onto this high level. Sterling traders will watch today’s Bank of England policy decision at 11:00 UTC. While the BoE is unlikely to change its policy, attention will be paid to the central bank’s future guidance. A neutral stance might be considered as positive for the pound whereas a dovish stance could increase the pressure on the pound.

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We wish you good trades and many pips!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2017 Maimar-FX.

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Market Remained Unimpressed By FOMC Statement

Dear Traders,

The market reaction to the FOMC statement was muted with the U.S. dollar ending the trading day virtually unchanged against the euro and British pound. While the Fed minutes confirmed that the central bank is moving toward tightening it also shows continuing disagreement among policy makers. Last month’s decision to hold interest rates at their current level was a close call with three FOMC members dissenting for a rate rise, the minutes showed. Market participants expect the Fed to move in December and while the market is pricing in the probability of year-end hike, the Fed may consider that move to be inevitable to preserve the central bank’s credibility.

Overall, the dollar remains bid on corrections and investors will be looking for dollar dips to buy the currency and participate on the dollar rally. Consequently, we expect further dollar gains in the medium-term but we will pay attention to potential pullbacks in the short-term.

There are no major economic reports scheduled for release today so trading could be quiet.

Here is where we see current resistance and support levels for both currency pairs:

  Resistances Supports
EUR/USD 1.1050/60

1.11

 

1.10

1.0970

 

 

  Resistances Supports
GBP/USD 1.2230

1.2320

1.2150

1.21

Daily Forex signals:

Additional daily and long-term entries are available for subscribers.

View our daily signal alerts https://www.maimar.co/category/daily-signals/

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We wish you good trades and many pips!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2016 Maimar-FX.

www.maimar.co