Bernanke’s decision not to add any fresh stimulus saw a relatively modest rise in the USD but the lack of any major fireworks showed that the market wasn’t really expecting anything significant from the Fed and that overall positioning was quite light. Now we shall have another session of nervous range-trading ahead of the ECB later today.
EUR/USD again failed to break above 1.2330, where Sovereigns have been selling this week, and over-zealous bulls were forced to trim post-Fed. Asia opens near modest technical support at 1.2225 and Sovereign bids have been reported near 1.2200. If USD/Asia gets a bid tone, then I would expect to see some downward pressure on EUR/USD during our trading session but any dips should be limited to 1.2160/70 pre-ECB. Intraday rallies should be limited to 1.2270.
AUD/USD topped out near 1.0540 and if no fresh CB buying emerges, I’d expect to see the pair drift lower towards 1.0400. Once again, general USD/Asia buying could be a sentiment trigger and if regional stock markets turn bearish, that will affect risk sentiment and the AUD. The market has been getting quite bullish on the AUD and I don’t think that 1.05 is the right place to be getting bullish. Australian trade deficit due at 11:30 Sydney time and is expected to be around AUD$500
USD/JPY put in a very modest rally after the Fed but momentum is still lacking and it seems pointless trying to trade this pair at the moment. With the BOJ supposedly supporting the pair below 78.00 through stealth intervention, buying intraday dips seems like the most sensible play but 30/40 pips is becoming a decent move here.
The JPY crosses will be at the mercy of risk sentiment. The EUR/JPY market has been trying to post a base but if the pair breaks back below 95.55 and particularly below 95.20 (see attached chart), then we can expect some of the bottom-pickers to bail out.
Sterling had another shaky night and when you start losing ground against the EUR, you know you are in trouble.