AUD/USD: 0.8950EUR/USD: 1.2840Despite a soft US CPI, then more importantly, the Fed's FOMC statement - keeping rates at their current levels for a "considerable time", the dollar buying has been relentless and currently has all other currencies back pedalling furiously as they make new trend lows. More of the same looks likely and there is only one trade to watch right now although that may change if Scotland vote "Yes" in today's referendum. The polls suggest otherwise. That aside, the US Housing data will be in focus but before then we get the NZQ2 GDP, RBA Annual Report and SNB Rate decision.
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Despite the fact that the Fed moderated their growth projections and left the wording of their statement unchanged in keeping rates on hold for a “considerable time”, the Euro was unable to make any gains at the dollar's expense in the way that the market had expected it might do. Janet Yellen did add that any action on rates is highly dependent on the degree of future economic growth and that she expects asset buying to finish at next month’s meeting, having been wound back bio another US$10 bio this month.
The Euro was not even able to make it to yesterday's high on the announcement, and having had a quick spike to 1.2981, strong dollar demand has since seen the Euro fall sharply to a low, so far of 1.2835 at the end of the NY session.
It now looks as though we are now going to chop around here for a while as the market turns its focus to the Scottish vote, with the Euro likely to see some flow on volatility from any flows in the cross and EURGBP will be very active later on today. The dollar will also see flows to/from Sterling and we will also have the US Housing data later in the day.
Technically, having taken out the previous trend low at 1.2858, there really is not a lot to stop it heading to 1.2800 and then to the target area of 1.2780 (major rising trend support; from July 2001), which comes just ahead of the 9 July 2013 low at 1.2754.
On the topside, it seems that there is plenty of interest to buy dollars into any weakness. 1.2860 and then 1.2900 will now act as resistance but it does not appear that we are going to see it back up there today. If the Euro does squeeze higher, then 1.2940 will see sellers. I cannot really see it above here now, but if wrong, the session high at 1.2980 and then 1.3000 will act as strong resistance.
Stay long dollars but leave room to sell into rallies in the Euro, albeit they look likely to be rather shallow as the market chases the move towards the 1.2750 target. Note that the DXY today made it to 84.70, just shy of the July 2013 high at 84.75, which should act as strong resistance (see DXY outlook; at the end of this report).
Economic data highlights will include:
US Building Permits, Housing Starts, Jobless Claims, Philly Fed Mfg Survey, G20 Meeting.
Jim LanglandsFX Charts www.fxchartsdaily.com
