How Soon is Now

The Fed JanuaryFOMC minutes revealed a consensus among Fed members to raise rates but the minutes offered up little more than studiously ambiguous double talk by suggesting a rate hike would be delivered “ fairly  soon.” Short term dollar speculators were hoping the Feds would produce a more meaningful time frame, but dealers are left dangling, and just like the ever cautious Dr. Yellen, awaiting clarity regarding the yet-to-be implemented Trump policies.

Euro

The European election risk undoubtedly influenced the overnight weakness in the  Euro, and to a lesser degree, the move was stretched by short-term speculators getting long USD dollar ahead of the FOMC, hoping the feds would take this opportunity to lay their March Rate hike cards on the table. However, after touching a low of 1.0495, the EUR pivoted higher when leading centrist Emmanuel Macron agreed to an offer of an alliance from centrist Francois Bayrou as EURO investors breathed a temporary sigh of relief that this marriage would reduce Le Pen’s chance of victory.  The move higher was compounded by day trade speculators exiting Euro shorts in a gradual fashion The  EURO then again gapped higher as weak pre FOMC minutes shorts ran for the exits post-Fed obfuscation. However ongoing concerns about increasing traction from far-right and anti-EU candidate Le Pen should keep the Euro well offered and with so much ambiguity in the run up to the first phase of the French election, the Euro will be severely tested in the weeks ahead.  If you need any  further conviction consider the late NY headlines were Le Pen was quoted “ the EUR is “banker’s money” and “not for the people.” hardly a positive signal to the European investment community

Australian Dollar

With RBA Lowe raising the bar for rate cuts, coupled with FOMC minutes double talk, the Australian dollar has bounced above .7700 as the USD dollar floundered across G-10. However we need to keep in mind the market has adopted a day trade mentality as positioning, positive or negative, gets quickly nipped for fear of getting caught wrong-footed in a market fraught with uncertainty. It is as if holding a position for over 3 hours is considered a long term trade in this environment.

Sure the Fed’s  were less hawkish than short term positioning was comfortable with, but don’t fall into the trap of thinking the Feds are not preparing for lift off as this morning dollar sell-off was little more than pull back from the market’s enlarged event risk view. Expect these types of position event moves to continue as dealers desperately grapple for conviction.

The Aussie should remain constructive on the back of the short term carry and supportive commodity prices.However, with uncertainties in every pocket of the market abounding, global risk outlook certainly looks fragile which could impede any short-term move higher.  Look for the European political risk to heighten while on the US rates front, traders will pay substantial attention to the incoming US economic data and remain vigilant and on guard for any comments from Camp Trump.

Japanese Yen

It is all about short-term positioning and little more.The dip post FOMC minutes was little more that a reflection of short-term punters rolling the dice on an underpriced March Fed Rate Hike scenario.Without sounding like a broken record, the two divergent drivers, Eurozone political risk and Fed Rate hike will likely keep the edges of recent support and resistance intact. ¥112-115.Given the overwhelming concern about the eurozone election risk,  thoughts of impending risk aversion will continue to keep the top side USDJPY in check as EURJPY selling if very much in play which favors the downside in the absence of economic clarity from Camp Trump.However, I do not see the battle of the $ Bulls and Bears abating anytime soon so get ready to ride that rollercoaster