Mr Bernanke’s announcement was mostly in line with expectations but the open-ended nature of the comments has given risk assets a major boost. The AUD has out-performed on the FX market with the carry trade back in vogue. Elsewhere it was a matter of selling the USD and triggering barriers in major pairs.
EUR/USD had a very choppy ride around the time of the announcement, up and down in very sharp moves, but the breaching of major technical resistance at 1.2935/40 and the market’s ability to snuff out a barrier at 1.3000 shows that the bull market is still well in control. EUR bears may find some selling opportunities against the AUD in coming days but with the USD now firmly in a downtrend, buying EUR/USD dips still looks like the path of least resistance.
USD/JPY smashed through some large barriers at 77.50 and triggered heavy stops below 77.40 before rebounding after the Fed inspired risk-appetite lifted the Yen crosses. We can expect plenty of verbal intervention from Japanese officials but Japanese banks are not expecting any actual intervention. Corporate and real-money offers still at 78.20 but may move lower after last night’s bearish breaks. There is little in the way of major technical support now until 76.05 (see chart).
AUD/USD fell in European trade but the FOMC with its sell-USD, buy-risk message encouraged some very heavy buying of the AUD across the board. Bears would now do well to take a day for some reflection. Next resistance in the AUD/USD is at 1.0615 and we should see an overall outperformance on the crosses. Remember that it is Friday today, so don’t get your hopes up for any big Asian moves.
EUR/CHF has continued to move higher, albeit in choppy trading conditions, and the SNB looks to be serious about its attempts to raise the floor.
The GBP has underperformed against the EUR and the AUD and interbank reports suggest that this is flow related, with heavy offers at 1.6150, 1.6175 and 1.6200 slowing down bullish progress in cable.
Good luck today and TGIF.