Most of the market segments had anticipated a rate at hike at today’s concluded FOMC (Federal Open Market Committee) meeting. However, the pundits were also of the unanimous view that it would be a dovish rate hike considering the fact that the inflation has been subdued in the U.S, with markets exhibiting extreme volatility caused by the tariff war between U.S/China & the mounting political pressure on the Feds by U.S President Trump who tweeted this earlier:
“It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!”
Defying all odds Chairman Powell of the FOMC not only delivered a rate hike but also maintained the hawkish posture stating categorically that the Feds would not budge under any political pressure & continue to honor the mandate that has been given to them of the U.S Congress – to make use of the monetary policy to guide the economy on the best path possible with the available data & economic indicators. Moving on from this tug of war let’s see what the technical chart patterns for the USD Majors in Forex are dictating. Most of the USD counterparts fell against the reserve currency with the exception of Yen.
EURUSD (MT – Bearish, ST – Bearish)
The pair was able to rebound handsomely to its previous high in the 1.1440 region before falling on the FOMC rate news. Failure at this resistance points to further consolidation & the pair might extend its fall if the 1.1350 level is taken out. Italy’s successful negotiation with the EU over the budget deficit might help the pair but the driving force right now would be the news out of U.S
GBPUSD (MT – Bearish, ST – Bearish)
Cable held well against the backdrop of the market fall after Fed rate decision, but the long-term outlook looks shady at best for the pair, with the continued Brexit saga which is nowhere close to resolution. The resistance zone of 1.2680-1.2700 is capping ST gains with the choppy bearish bias persisting.
USDJPY (MT – Neutral, ST – Bearish)
The bearish channel is still in play for the pair. Even with the drastic export growth of Japan in November combined with the rate hike from the Feds couldn’t lift the pair beyond the ST resistance of 112.70, where gains look capped for now. The ruling theme in USDJPY is the extreme market volatility & downturn – historically the pair moves with the risk sentiment in the Equity markets which is extremely bearish right now.
AUDUSD (MT – Bearish, ST – Bearish)
AUDUSD has been one of the weakest pair evident from its co-relation with the Stocks. Another major worry for the Aussie has been the continued slowdown in the Chinese economy who is its biggest trading partner of Australia & responsible for country’s immense economic growth. The three bearish channels are a testament to the bearish momentum which is going strong. Any rebound in the ST should cap gains below 0.7200.
USDCAD (MT – Bullish, ST – Bullish)
The bullish momentum in the pair continues unabated as the Oil prices plummet to yearly lows. The pair has a strong inverse co-relation with the commodity. Not the only factor but a major one for sure, with the move amplified by risk off sentiment in Equities & divergence of FOMC from BoC on interest rate trajectory. Immediate support @ 1.3420 above which bullish run would continue, fall below this level would extend consolidation.
NZDUSD (MT – Bearish, ST – Bearish)
Another one of the commodity pairs which came under the knife today for all the reasons mentioned above. It was actually performing much better than its counterparts against the USD & than FOMC happened! Pretty sharp decline today & it accelerated after hours on weaker than expected GDP data out of New Zealand. Immediate Resistance 0.6780-0.6790. Strong bearish momentum should keep any recovery in check.
Dollar Index has held its bullish trend line with today’s news. The next couple of days will define if the USD strength persists or if there is any meaningful reversal created by the oversold conditions in the pairs. With the Equity markets reacting unfavorably to the rate hike, it looks like Greenback’s strength is not going away any time soon. Happy Trading guys!