Weak US data offset by strong FED Statement

Federal Reserve

What Happened Yesterday

The USD was steady on Wednesday, reversing major early losses, after the Federal Reserve raised U.S. overnight interest rates and said it was prepared to continue tightening monetary policy.

The USD index, fell to its lowest level since Nov. 9 in early trading after the release of weaker-than-expected U.S. inflation and retail sales figures.

U.S. retail sales in May recorded their biggest drop in 16 months and the Consumer Price Index unexpectedly fell month-over-month, suggesting inflation pressures could be moderating.

 

However, the Federal Reserve, in the statement released at the close of a two-day policy meeting, indicated it viewed the recent weakness in economic data as temporary, and it detailed expectations to continue raising rates. The Fed also laid out plans to pare back its $4 trillion balance sheet this year.

And to add the last little ‘kicker’, Fed Chair Janet Yellen’s news conference highlighted the central bank’s rosy outlook on the economy, boosting the dollar broadly.

Read the whole FED Statement: click here

So where to now for the USD?

In my experience it usually takes about 4-6 hours for the dust to settle after the FED meeting before the USD starts to make it’s move.

The current set up is complicating because of the early US data which was bit of a shocker.

At the moment it looks like the market isn’t quite sure whether they should be buying or selling USD.

To me the FED wins out and is longer term so I think well see a USD up-move from here based off their plans to pare back their balance sheet. That’s new and big.

But it may require a strong US number of weak Euro or GBP number to get the USD rolling again.

What’s Happening with the Majors

Most of the majors had bit of a roller-coaster ride but none more than EURUSD which spiked up 100 points on the weak US data and then down 105 on the FED announcement.

It’s looking a little oversold so may stall around 1.1200 for the time being.

To me the ECB is dovish and FED hawkish…so I see EURUSD going down!

Sterling…. dogs breakfast. All over the shop but the initial downward move following the UK election has officially stalled. But any bad Brexit news and it will slide quickly.

AUD & NZD …. the antipodeans or commodity currencies are still in short term up trends but not really going anywhere. Today’s Aussie Employment data will be key to the next leg of direction.

The Beast – USDYEN – It;s retraced back to resistance around 110.00 but i’m just not sure where it’s going. The topside may be a struggle so it could be sideways for now.

 

The Funds – USDCAD – Heading lower but the FED has slowed the move down and almost created a nice move to get short back towards 1.3300. I still think it’s heading to 1.3000 but the move will be USD dependent.

The Swissie well it’s caught up in the whole EUR move. If we see EUR move either way the Swissie will follow!

The Next Best Trade

We still have the EURYEN order in the market but I am expecting to add to the list over the next 24 hours.

We have loads of good set ups and once the USD direction reveals itself we should have direction.

Now is the time to be patient and just wait.

All we need is a whiff of the move and we are on!

There could be a few good short term trades as well with NZ GDP and AUST Employment data scheduled!

Important Note: We’ll be updating the ‘Next Best Trade’ when the opportunity arises.

Pro Members keep an eye on the Next Best Trade List and we’ll also get an email out to you with any updates.

Today’s IMPACT Calendar – Thursday 15 June

 

Asian Session:

The AUD and NZD will both be whipping about with key economic data being released.

We’ve got good trendlines on the downside also so the opportunity is there, we just need the data to give us the lead.

European Session:

It’s going to be another busy one for Sterling with Retail sales and the BOE to follow.

Plus we’ve got the Quarterly SNB meeting as well. It’s as rare as hens teeth!

If we haven’t already got the USD on the move by this session this data may give it the kick it needs.

North American Session:

We have a few opportunities for a USD move with Industrial Production and Capacity Utilisation scheduled.

The market will be gagging for USD direction so any variance here and it may start to run.

Well that’s it for now traders.

We’re currently in bit of a quandary with regards USD direction right at the moment. But believe me we’ll see a move shortly and that’s the time to pounce.

The best thing you can do is tune up your charts and get ready to trade.

See you in the Live Trade Zone.

Brad

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