Fed Slams The Dollar | AUD/USD, USD/JPY

Dovish comments from Fed officials has put a 50bps cut in July back onto the table for markets, and markets were quick to respond.

Fed’s William’s said current estimates of the US neutral interest rates are around 0.5% and, if inflation gets stuck below goal, people’s expectations may push inflation lower, “reducing the Fed’s ability to be effective”.
Richard Clarinda, who was mostly ‘centrist’ at the June meeting, said during a live TV interview that “you don’t want to wait until data turns decisively” and “it’s important to act pre-emptively.

fxsoriginal

That these comments were said on Donald Trump’s favourite Fox News program, ‘Fox and Friends’ is also worth noting, given the Fed have been accused of bowing to the President’s pressure and therefor, not as independent as they claim. Still, what’s said is said and markets reacted accordingly.

USD index closed to a 2-week low amid its most bearish session in 1-month
Gold broke to a fresh, 6-year high (nice call Fawad)
AUD/USD hit a 3-month high
US2yr fell to 1.76%, a 9-day low and now far from its YTD lows
OIS markets are now pricing in a 76% chance of a 50bps cut this month, whilst CME’s FedWatch tool suggests a relatively modest 44.2%.

Starting with AUD/USD, it’s most bullish day since late January closed right on the December ’18 bearish trendline.

A higher high and low has materialised since the 2016 low, which could be part of an inverted head and shoulders pattern.
If successful, the pattern projects an approximate target around 0.727, although the 0.7200 area makes a logical interim target
However, the 200-day MA and eMA are nearby, so we’d want to see a clear break above 0.7100 before assuming a bullish reversal

USD/JPY looks set to re-test its lows and potentially extend its bearish trend now bearish momentum has returned.

The 109.02 resistance level previously highlighted has continued to be a good level to fade into, with the 50-day eMA capping as resistance
Intraday traders could look for shorts below the 107.54 area (but expect some noise around this level heading into the weekend)
The daily structure remains bearish below 109.02, but we could consider fading into moves on the daily chart below 108.38
Next target is 106.78 but the bias is for a break to new lows

Share: Analysis feed

CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed