AUD/USD: 0.9400EUR/USD: 1.3580The US$ is a bit weaker against most currencies after the FOMC meeting, with the Aud and Kiwi both performing particularly well, although elsewhere it has been mostly confined within with recent ranges. Equities are higher and the metals are firm. Today’s focus will be on the NZ GDP, coming up shortly, and later on, in Europe, the UK Retail Sales and SNB I/R decision, and from the US, the US Jobless Claims and Philly Fed Mfg Survey
The FOMC decision was rather much ago about nothing with the statement saying as little as possible, and the markets, although gyrating around on positioning as the algos got up and running, have generally ended up going nowhere outside the recent ranges despite an initial brief blip in the US$. While acknowledging that things are perhaps on slightly more solid ground, unemployment still remains elevated and the recovery in the housing sector remains slow, so a highly accommodative policy remains appropriate and less Fed board members are now seeking a rate hike in H1 2015 as the inflation outlook remains very benign.
While traders were hoping for a more hawkish tone from Janet Yellen, following on from the recent better-than-expected data, they were generally disappointed when the the Fed cut its forecast for U.S. economic growth to a range of between 2.1% – 2.3% for 2014 from an earlier forecast of around 2.9%.
The Euro made a quick run to 1.3600 but then came back to sit at around 1.3575/80 over the course of Janet Yellen’s Press Conference and therefore there is little change from a technical point of view from this time yesterday.
Having taken out the offers above 1.3580, the next hurdle will be at 1.3600 and then close by at 1.3607 (61.8% of 1.3676/1.3502). Further offers will arrive at 1.3615 (23.6% of 1.3994/1.2502) and 1.3630 (76.4% of 1.3676/1.3502) above which, the Euro could reach up towards the 6 June high at 1.3676, which in turn lies just ahead of important Fibo resistance at 1.3687 (38.2% of 1.3994/1.2502).
On the downside, the strong support remains intact at the bottom end of the recent range. The Fibo support at 1.3518 (38.2% of 1.2754/1.3995) will again find bids ahead of the post-ECB spike low at 1.3502, which will again be strong support. A break below 1.3500 would head towards the medium term target at the base of the rising wedge, at around 1.3440, where we would be squaring up shorts and looking for a bounce. If wrong on this, a break of the wedge base would hint at a further move south towards 1.3370 (50% pivot % of 1.2754/1.3995) and then to 1.3294 (7 Nov ’13 low).
It looks as though we are in for more choppy trade today – and possibly until the end of the week given that there is not much data out of either Europe or the US over the next few days. The indicators are pretty flat, although may be attempting to build some very mild positive momentum and I would think that 1.3520/1.3600 should once again cover it today. I would probably rather trade it from the long side, although not convinced.
Economic data highlights will include:
Eurogroup Meeting, US Jobless Claims, Philly Fed Mfg Survey, CB Leading Indicator
Jim LanglandsFX Charts www.fxcharts.com.au
