New York Forex Report: In the wake of last night’s Dovish FOMC, the US dollar has fallen sharply, as investors scale back US rate-hike expectations. Commodity and equity markets have seen a big boost over early European trading today extending gains from last night’s meeting, adding strong support for the commodity FX bloc. The Fed held its benchmark rate target at 0.25% to 0.5% as expected while cutting its outlook on tightening path. The dot plot indicated that the central bank may hike rate twice this year from its Dec. projection of four hikes, underscoring increasing concern on global and domestic risks. Economic projection for GDP growth was revised lower to reflect prevailing downside pressure. The economy is expected to expand 2.2% in 2016 (previous: 2.4%) and inflation to rise 1.2% (previous: 1.6%). In addition, Fed Chair Yellen said that the central bank is not considering negative interest rates. USD slumped, returning all early gains on better than expected US data after the FOMC lowered markets’ expectations for future hikes.
EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: The Euro continues to surge higher following the Fed’s statement. Big question for traders now is will markets shift their focus back to the easing measures from ECB and stem further upside? EuroZone February CPI was better than expected.
Technical: Intraday support is sited at 1.1060/40 held solid and provided the platform for an explosive move higher expect a further grind higher to test pivotal resistance at 1.1370 while 1.1150 supports intraday. Only a close below 1.10 eases immediate bullish pressure
Interbank Flows: Bids 1.1150 stops below. Offers 1.13 stops above.
Retail Sentiment: Bearish
Trading Take-away: Long
GBP/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: A surprisingly Hawkish BOE meeting today took markets by surprise with the BOE stating that an increase in rates is more likely than not, citing the need for an increase to boost inflation back to target whilst rising productivity and tighter labour market conditions are supportive of incomes and consumption.
Technical: Break of 1.43 targets last week’s high at 1.4434 en-route to a test next resistance at 1.4570 ahead of the 1.4670 February high.
Interbank Flows: Bids 1.4150 offers 1.44 stops above 1.4450
Retail Sentiment: Bearish
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Being a main composite in the USD Index, the JPY was stronger after the Fed’s dovish comments. USD/JPY dropped from around 113.81 to an intraday low of 112.31. Overnight downside pressure has persisted and continued over early European trading taking the pair sub 112.
Technical: Failure at 112 opens a full retest of bids towards 111 again a sustained breach here will leave the psychological 110 exposed, a close over 113 is required to neutralise the immediate downside threat.
Interbank Flows: Bids 111 stops below. Offers 112.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
EUR/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR/JPY flows remain choppy with both EUR & JPY deriving strong support in the wake of the Dovish FOMC meeting last night
Technical: While 125 acts as support for the current advance expect a test of symmetry resistance at 128.15 as the immediate corrective objective. Failure at 124.50 suggest false upside break and opens retest of 123.
Interbank Flows: Bids 125 stops below. Offers 127.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines
AUD/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Fundamental: Australian jobs data for February was mixed, with unemployment rate dropping to 5.8% from 6% and overall employment rising by 0.3k against 10k expected. AUD/USD reacted positively to the data release as markets remain content with RBA’s view that conditions in the labour market are improving, further boosted by strong risk-sentiment post-FOMC.
Technical: While .7400 supports intraday expect further upside pressure targeting .7672 next. Only a failure at.7300 support threatens near term bullish bias.
Interbank Flows: Bids .7400 stops below. Offers .7670 stops above.
Retail Sentiment: Bearish
Trading Take-away: Long
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: : Around 15 major oil-producing nations, accounting for 73 percent of global oil output, support holding talks next month on a deal to freeze output even if Iran declines to participate. Brent crude surged above $40 a barrel in response to the announcement. With indication that the Fed will only look for two rate hikes this year, the USD has been heavily sold across the board, with USD/CAD trading sharply lower.
Technical: While 1.3160/80 contains corrections, downside pressure remains the driver with bears focusing on a AB=CD ultimate downside objective at 1.2966. Only a close over 1.3650 negates the bearish bias.
Interbank Flows: Bids 1.3000 stops below. Offers 1.3150 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
