The FOMC announcement probably had a bit for everyone, without actually saying anything to change the overall outlook. While quietly confident about the direction for the US economy, the Fed also noted that inflation remains sub target as well as acknowledging the challenges in the global economic cycle. After a choppy session, the dollar bulls are taking charge and seem to be aggressively buying it again, particularly against the Euro, at the time of writing. Today sees a fair bit of secondary data from the EU and US in what looks likely to be a choppy session, although much of the session will be spent digesting the Fed’s statement.
EUR/USD: 1.1313
The key theme from the Fed following the FOMC was the need for patience on thoughts of raising rates, as the US economy and the employment rate continues to slowly improve. They hedged their bets by acknowledging the downside risks, including lower inflation, on the back of soft energy prices and also noted their concerns over the international economic outlook.
The outcome, form a market perspective has so far been reasonably benign as far as the EurUsd is concerned as it sits close to 1.1315, although dollar buyers are emerging.
More of the choppy trade looks likely for the coming session as the market digest the outcome of the fed decision and where we go from here. The 4 hour charts continue to recover from having been oversold and the dailies now appear to be turning higher too, so a corrective squeeze higher for the Euro could still be seen, although traders will be cautious of taking the Euro too high in case of any negative news from Greece, in particular, but also keeping an eye on Russia/Ukraine.
The downside is currently holding on to 1.1300, but below which would head back towards 1.1260 (minor) and 1.1220 (minor). Below 1.1200 would see a return towards the recent lows, although this looks a little unlikely to be seen today.
Further out, as we keep reiterating, below the rend low at 1.1097, the next obvious target is at 1.1000, where many analysts had previously been looking for a 2015 low, although the next realistic technical level is not seen until the September 2003 low at 1.0759, beyond which we are going to zero-in, eventually, on parity.
On the topside, the Euro is going to find sellers again at 1.1350, 1.1400 and at 1.1420, yesterday’s top. Beyond there will run into various points of resistance which will make for some headwinds to further Euro progress –1.1440 (23.6% of 1.2570/1.1097), 1.1455 (61.8% of 1.1680/1.1097), 1.1470(200 HMA) and then above 1.1500 at the descending trend resistance currently at 1.1520 will all present hurdles.
For the time being use 1.1260/1.1360 as a guide, with the initial feeling that 1.1300 is going to be tested.
Economic data highlights will include:
German Unemployment, ECB Monthly Report, EU Consumer Confidence, Business Climate, Industrial Confidence, Services Sentiment, US Pending Home sales, Jobless Claims.
Meta Trader – AxiTrader EUR/USD: 4 Hour
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USD/JPY: 117.63
No change in view.
The dollar is unchanged from this time yesterday; unphased by the FOMC announcement and the key points remain intact.
Below the quadruple bottom at around 117.30 would find further support at 117.00 (61.8% of 115.85/118.86) although below this would see the chance of a deeper decline towards 116.56 (76.4%) and possibly back to 115.85 (16 Jan low).
On the topside above 118.00 (100/200 HMA) will find selling interest at 118.25 and then at 118.50 and at yesterday’s session high at 118.65, where the daily cloud is still proving a major hurdle. If broken, then the dollar would head to 119.00, a break of which would then signal further gains towards the 12 Jan high at 119.30, beyond which 119.95 (8 Jan high) will come into view.
Further out look for a run towards 120.00 above which will suggest further gains towards the minor triple top at around 120.75. Eventually I suspect that we are heading towards 121.00, but not yet. If/when we do, do so, further advances towards the trend high at 121.85, above which would see a run towards the 15 July 2007 high at 122.42. In the longer term, the target of 124.13 (17 June 2007 high) would appear on the horizon but will take time given the resistance levels sitting in between.
Economic data highlights will include:
Industrial Production, Retail Sales/Trade.
Meta Trader – AxiTrader USD/JPY: 4 Hour
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GBP/USD: 1.5155
Cable has had a choppy session (1.5153/1.5218) and currently sits pretty much in the middle following the FOMC decision, and with the short term indicators being mixed, we should probably expect more of the same in the short term.
Back above 1.5200 (38.2% of 1.5620/1.4950), would find more sellers in the 1.5225/50 area that has capped the last couple of days, a break of which could send it on towards 1.5260 and then to 1.5285 (50% pivot of 1.5620/1.4950). A break of this, although a bit doubtful, would potentially see a sharper topside squeeze towards the 61.8% Fibo level at 1.5360.
Keep an eye out for the bullish divergence in the daily indicators, below. They may be giving an early warning of a stronger rally, although more likely I think, is some choppy consolidation over the next few days, below 1.5300 (possibly 1.5350), while at the same time holding on above support at 1.5100.
On the downside, minor support will arrive today at 1.5135 and then at the 200 HMA at 1.5110, below which the 100 HMA (1.5070) will again come into view.
Further out, we could eventually see another test of 1.5000, below which, 1.4985 and then Friday’s spike low at 1.4950 will see buyers, although I don’t see this area being bothered today unless the FOMC are hawkish in the extreme. If wrong, below 1.4950 would head to 1.4915 (61.8% of 1.3502/1.7191) and then, some way off, towards the July 2013 low at 1.4813. Below this could get ugly as there is not too much to hold Cable up ahead of the 76.4% Fibo level (1.3502/1.7191) at 1.4375.
Economic data highlights will include:
CBI Distributive Trade Survey.
Meta Trader – AxiTrader GBP/USD: 4 Hour
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USD/CHF: 0.9045
No change. Stand aside for now.
While it remains thin and volatile, I would leave it alone, although personally I remain long a small amount of US$Chf as I still like the US$ over the longer term, and suspect that buying dips towards 0.8800/0.8700 is probably the plan, with a SL below 0.8675.
If/when the Euro (EurUsd) heads lower, towards 1.10, and possibly in the longer term towards parity, then US$Chf may find the legs to head back towards 0.9500 and higher. Keep positions very small, or avoid it altogether. Patience will be required.
Meta Trader – AxiTrader USD/CHF: 4 Hour
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AUD/USD: 0.7945
The Aud headed to a high of 0.8024 as follow-through buying in Europe, on the back of the better than expected trimmed mean CPI figure before heading lower again in choppy trade ahead of the FOMC. The announcement caused some minor volatility as the Algos got busy but the Aud has stabilised, for the time being at around 0.7945. and with little data due today, a session of chopping around between 0.7900/0.8000 could be in store, although the mild bias remains for another test of the downside.
The indicators are mixed, with the hourlies looking flat/negative, while the 4 hourlies still point higher, suggesting the Aud may be underpinned today by any dips towards 0.7900, although a break would take us back towards the trend low at 0.7857.
Points to watch on the downside, below 0.7900 are at 0.7880 and at the trend low at 0.7857, where the base of the descending channel is providing some support. Under 0.7850, would head towards 0.7800 and then to 0.7765 (200 Month MA), the July 2009 low at 0.7700 and beyond, possibly to the RBA’s stated target at 0.7500, albeit not for a while.
On the topside above 0.7975 (minor) will again find sellers at 0.8000 (38.2% of 0.8230/0.7857), and at the session high at 0.8024. Above here (doubtful) would see a run towards 0.8050 (50% pivot of 0.8230/0.7857) and then to 0.8085 (61.8%), although I don’t see it happening today.
Look for 0.7860/0.7960 to cover it
Economic data highlights will include:
Import/Export Price Index.
Meta Trader – AxiTrader AUD/USD: 4 Hour
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NZD/USD: 0.7335
The Kiwi is sharply lower after the RBNZ kept rates on hold, delivered a more dovish statement and once again talked the Kiwi lower, stating that current levels were unjustifiably high. That seemed to do the trick and the Kiwi immediately dived to a 4 year low, so far trading down to 0.7328 and looking as though there is more to come.The next realistic support is at the 21 March 2011 low at 0.7289 and then at the spike low at 0.7115 (17 Mar 2011).The topside will see decent sellers at 0.7400 and above now, and selling rallies would seem to be the plan. The first Fibo resistance is now at 0.7460 (0.7880/0.7328)Meta Trader – AxiTrader NZD/USD: 4 Hour
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