ForexLive New York wrap-up: Fed maintains easy stance

Wed, Nov 4 2009, 21:18 GMT
http://www.forexlive.com

FOMC: To maintain "exceptionally low levels of the fed funds rate for an extended period" due to slack in the economy ADP employment report sees 203,000 private sector jobs lost in October; worse than expected ISM non-manufacturing PMI 50.6 in October from 50.9 in September; slightly weaker than expected CNBC: US not concerned by dollar weakness Berkshire Hathaway outlook placed on watch for a downgrade by S&P US equities reverse gains in final hour, S&P gives back 1.5% to close up 0.1% US yield curve steepens after Fed. Short-end rates fall, long end rise. 10-year note yield up to 3.52% Spot gold rises to new record at $1097.25; oil adds $1 to $80.65 EUR/USD opened the US session in the 1.4750 area after Mid-East accounts sold strength i London, around the 1.4770 level, capping intial gains. A report in the FT suggesting that the Fed would leave its "extended period" language unchanged set off a surge of risk-related buying, sending stocks higher and the dollar lower once again. The former area of resistance between 1.4845 and 1.4860 contained rallies until just seconds before the Fed announcement when prices began to shoot higher, triggering stops up to 1.4880. Confirmation from the Fed that it had maintained its easy policy sent EUR/USD up to 1.4903, from which a slide to 1.4825 was seen. We rebound from those lows to make a new 1.4908 high before a dip to 1.4760 late after US stocks shed all their gains. Specs are long but interbank traders look like they may have been caught short on the last push higher, helping limit dips late in the day. Similar stories across the board. Cable continued its recovery, stalling just pips shy of recent 1.6604 highs. We reached 1.6597 today and end around 1.6560. AUD/USD broke downtrend resistance at 0.9120 and reached 0.9144 before dipping along with US share prices. USD/JPY was choppy, jumping to 91.30 after the Fed statement as risk-assumption led the charge. Prices faded along with US share prices in the final hour of trade, dipping to 90.55. Traders saw demand for long-dated deep out of the money USD/JPY calls with strikes as high as 125 trading today.

The opinions and analysis offered on Forexlive are for educational purposes only and clients and prospects are advised to carefully consider the opinions and recommendations offered by the analysts and to use the analysis and opinions in conjunction with the client and/or prospects own independent analysis.