Yesterday’s FOMC meeting was about as dovish as could have been expected with Janet Yellen delivering a sort of "catatonic press conference". The central bank decided to taper bond buying program by another $10 billion (from a previous $45 billion) and no major economic and policy forecasts were contained in the statement released thirty minutes before Janet Yellen testimony. The largest adjustments were linked to the unemployment rate, where the 2015 central tendency was revised 0.2% downward, merely reflecting the recent sharp drop in the rate. Nothing new.
The reaction in currencies was clear and expected given the dovish nature of the speech. The USD was weaker, particularly against less liquid currencies and the smaller G10 currencies. The EUR/USD may top out more quickly than originally expected, as the EUR is a favourite funding currency at the moment for carry trades if this emboldens asset markets again. The default stance is that we will test the next layer of resistance coming in around 1.3685. I have a hard time imagining anything above 1.3750 for now. Otherwise, if 1.3600 stays more or less in place as resistance after this morning’s test higher, look for a break back below 1.3560/50 to indicate that the bearish case may rebuild again immediately.
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EUR/USD May Top Out Sooner Than Expected
Published 06/19/2014, 10:05 AM
Updated 07/09/2023, 06:32 AM
EUR/USD May Top Out Sooner Than Expected
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