EUR/USD: FOMC Becomes More Dovish This Year

GROWTHACES.COM Forex Trading Strategies:

Trading Positions:

EUR/USD trading strategy: long at 1.1220, target 1.1550, stop-loss 1.1280

GBP/USD trading strategy: long at 1.5080, target 1.5250, stop-loss 1.5100

USD/CHF trading strategy: long at 0.8980, target 0.9180, stop-loss 0.8930

AUD/USD trading strategy: long at 0.7905, target 0.8250, stop-loss 0.7840

NZD/USD trading strategy: long at 0.7430, target 0.7750, stop-loss 0.7370

EUR/GBP trading strategy: long at 0.7470, target 0.7650, stop-loss 0.7390

EUR/JPY trading strategy: long at 133.90, target 136.10, stop-loss 132.90

EUR/CHF trading strategy: long at 1.0160, target 1.0650, stop-loss 1.0075

GBP/JPY trading strategy: long at 179.00, target 182.00, stop-loss 177.55

AUD/NZD trading strategy: short at 1.0680, target 1.0350, stop-loss 1.0770

Pending Orders:

USD/JPY trading strategy: sell at 119.20, if filled target 116.60, stop-loss 120.00

USD/CAD trading strategy: buy at 1.2350, if filled target 1.2720, stop-loss 1.2250

AUD/JPY trading strategy: buy at 93.10, if filled target 96.20, stop-loss 92.20

EUR/USD: FOMC Becomes More Dovish This Year

(long for 1.1550)

• Federal Reserve ends its policy meeting today and is widely expected to repeat the pledge it made in December that it will be patient in raising rates. The decision will be announced at 19:00 GMT. Although the real economy figures improved significantly, inflation is far below the Fed’s target because of plunge in oil prices and strength of the USD.

• There will be no Yellen news conference after this meeting and no updates to the Fed's economic forecasts. That is why nothing extraordinary should be expected today.

• We should remember that there will be a new set of voters at FOMC meetings this year, probably more “dovish”. Two strong “hawks” Charles Plosser, head of the Fed's regional bank in Philadelphia, and Richard Fisher, head of Fed’s bank in Dallas, no longer have votes this year under the rotation system for Fed bank presidents. Take a look at our Fed dove-hawk scale and see that the Fed becomes more dovish this year.

• In line with our medium-term EUR/USD scenario, investors are starting to push back their predicted timetable for the first rate hike to December or even 2016. On the other hand, the ECB did what it had to do and no additional action by the ECB should be expected in the near future.

• We expect a continuation of the EUR/USD rise and keep our short-term target at 1.1550.

Significant technical analysis' levels:

Resistance: 1.1423 (high Jan 27), 1.1453 (10-dma), 1.1646 (high Jan 22)

Support: 1.1224 (low Jan 27), 1.1098 (low Jan 26), 1.1047 (low Sep 8, 2003)

AUD/USD Rose After CPI Data, Eyes On The RBNZ Now

• Australian inflation braked to 1.7% yoy in the fourth quarter from 2.3% in the third quarter, below the median forecast of 1.8%. The Australian Bureau of Statistics reported outright price falls for petrol, consumer electronics, mobile phones, drugs and fruit and vegetables in the quarter. The largest increases came in tobacco, holiday travel and the cost of buying a home.

• However, key measures of underlying inflation amounted to 0.7% in the fourth quarter, above market forecasts of 0.5% yoy. This reading was taken as diminishing the chances of an imminent cut in rates from the Reserve Bank of Australia. The expectations for monetary policy easing have strengthened especially after surprising rate cut in Canada last week. Moreover, the Monetary Authority of Singapore unexpectedly reduced the slope of its monetary policy band today, adding to pressure on other central banks in the region.

• The RBA meeting is scheduled for next week and we do not expect any changes in interest rates.

• Our buy order on the AUD/USD was filled at 0.7905, just ahead of the release of CPI reading and the AUD/USD rose strongly after Wednesday’s data. The move was pretty in line with our forecasts. Our AUD/USD trading strategy is to stay long for 0.8250.

• The AUD rose also against the NZD after the CPI data. In our opinion the rise was short-lived and the AUD/NZD rate is likely to go down again today after the Reserve Bank of New Zealand meeting (today 20:00 GMT), as we do not expect monetary easing in New Zealand.

• If the RBNZ keeps interest rates unchanged, it will be supportive not only for the NZD/USD but also for the AUD/USD.

Significant technical analysis' levels:

Resistance: 0.8026 (hourly high Jan 28), 0.8056 (high Jan 23), 0.8070 (10-dma)

Support: 0.7900 (hourly low Jan 28), 0.7850 (low Jan 26), 0.7814 (low Jul 14, 2009)