Dovish FOMC, BoE Rate Decision, Euro Finds a Bid

Market Themes and Movers – FOMC, BoE Decision, Euro, JPY and NOK in Favour

USD: Wednesday’s FOMC meeting revealed a dovish US central bank with further interest rate hikes in 2019 now looking very unlikely. The Fed hinted at a 0.25% hike in 2020 but markets are now pricing-in a cut in rates in 2020 as growth concerns continue. The central bank also reigned in its bond normalization program with sales expected to stop by the end of September, three months earlier than had been expected by some market commentators. US Treasury yields fell to multi-month lows, dragging the US dollar down.

GBP: The Bank of England is fully expected to leave all monetary policy settings unchangedat today’s MPC meeting as Brexit continues to cloud the UK’s economic outlook. Recent jobs, wages and retail sales data has beaten market expectations and highlights a growing divergence between robust employment and weak economic growth. The Bank of England will need to tread carefully once/if Brexit is resolved.

EUR/JPY/NOK: Both the Euro and the Japanese Yen reacted positively to the outcome of the FOMC meeting and pushed ahead against the US dollar. While gains may be limited in the short-term, both may continue to find favour going forward and press through recent resistance levels. The Norges Bank raised interest rates by 0.25% to 1.0% today, as expected, and signalled another hike in H2 this year, boosting the value of the Norwegian Krone further.

Chart of the Day – Multi-Month Low 10-Yr US Treasury Yield

Dovish FOMC, BoE Rate Decision, Euro Finds a Bid - US Market Open

DailyFX Economic Calendar: For updated and timely economic releases.

How to use IG Client Sentiment to Improve Your Trading

Retail sentiment is an important tool for any trader to help gauge market sentiment and positioning. We provide updated daily and weekly positional changes on a wide range of currencies and asset classes to help decision making.

Market Movers with Updated News and Analysis:

  1. S&P Backing into Support, Dow Jones and Nasdaq 100 Chart Outlook.
  2. EURUSD Price Hitting Resistance But Sentiment Remains Bullish.
  3. Yen May Rise as Dovish SNB, BoE Add to Global Slowdown Fears.
  4. US Dollar Dives After March FOMC Meeting Reveals Dovish Fed.
  5. Gold Price Forecast Brightens Amid Drop in US Treasury Yields.

— Written by Nick Cawley, Market Analyst

To contact Nick, email him at

Follow Nick on Twitter @nickcawley1

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Gold Price Breaks Out to Fresh Highs as EURUSD Rebuffed at Resistance

Gold Price, EURUSD, US Dollar Talking Points:

Yesterday’s FOMC rate decision brought a quick-move of USD-weakness that saw the currency push down to test a key trend-line on the chart. That support has since held, but the ramifications of that move continue to be felt in related markets such as EURUSD and Gold prices. Both markets put in stern topside breakouts, running to the next area of potential resistance. The big question now is whether that strength can continue in EURUSD and Gold prices; or whether US Dollar bulls exhibit a strong reaction to yesterday’s trend-line test.

– Of particular note around yesterday’s FOMC rate decision was the movement in equities. Stocks were very strong in the immediate aftermath of the statement release; but those gains slowly dissipated and, at this point, the net result has been a bearish move lower. This may be coming from a bit of fresh fear as the Fed went more dovish than many had anticipated; begging the question as to whether this might trigger a fresh round of risk aversion after the development of the bullish backdrop in 2019 trade.

– DailyFX Forecasts are published on a variety of currencies such as the US Dollar or the Euroand are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

It’s been a fast and furious day of price action across global markets with yesterday’s FOMC rate decision pushing economic themes around-the-world. The FOMC came out very dovish, forecasting zero rate hikes through the remainder of this year and just one for next year. The immediate reaction was a quick move of strength in US stocks that has since dissipated, going along with a bearish push in the US Dollar until prices ran into trend-line support.

Today’s price action should remain very interesting as a number of these themes remain unsettled. One of the big takeaways in the aftermath of FOMC has been a clean topside breakout in Gold prices. I had looked at a key zone of resistance in Gold prices a couple of different times this week, looking for bullish breakout potential to run-up to the confluent area around $1320. That move has already played out, and Gold prices are now pulling back after testing that key area on the chart. The big question now is how motivated bulls might remain to be: Will they allow for prices to push back to find support around prior resistance? Or, are buyers going to remain excited enough to push from higher-low support around the 1314-1315 area?

Gold Price Two-Hour Price Chart

Gold price two hour price chart

US Dollar Moves Down for a Trend-Line Re-Test

Yesterday’s FOMC rate decision surprised many by just how dovish the bank appears to be, and this brought in a quick run of USD-weakness that saw the currency push down to a key area of trend-line support. That trend-line has since helped to hold the lows, and this keeps the longer-term ascending triangle formation in-order unless a deeper downside break presents itself.

US Dollar Daily Price Chart

us dollar price usd daily price chart

EURUSD Rallies All the Way Up to Prior Range Resistance

Going along with that move of extreme short-term weakness in USD running into support, EURUSD experienced a pronounced bullish run that saw prices move all-the-way up to prior range resistance around 1.1448. This level came into play just after the rate decision, and since then prices in the pair have been peeling lower, now re-testing the 1.1400 area.

EURUSD Daily Price Chart

eurusd price eur/usd daily price chart

The big question here, and this will likely remain inextricably linked to the above question in the US Dollar; is whether a large run of strength might be in the cards after yesterday’s pronounced move. It was just two weeks ago that the ECB announced another fresh round of TLTRO’s while aggressively cutting growth forecasts. This dovish move served to provide about a day’s worth of weakness to the single currency, at which point prices caught Fibonacci support around 1.1187 before starting a rally that has continued through FOMC.

EURUSD Two-Hour Price Chart

eurusd price eur/usd two hour price chart

USD-Weakness Strategies

For traders that do want to look for a deeper breakdown in the US Dollar after yesterday’s dovish shift at the Fed, there are a number of potentially attractive markets to work with.

I had looked at three setups designed for weakness (and one for USD-strength) in this week’s FX Setups; and while USDJPY no longer looks as attractive for continued topside, the three areas for USD-weakness remain of interest. In AUDUSD, prices have climbed back-above the key area on the chart that runs from .7125-.7150, and the ‘big’ area of longer-term resistance lurks above. This area runs from .7185-.7206, and this zone did a great job of holding the highs in the pair in the second-half of February. This area can function as topside profit targets for short-term strategies around USD-weakness.

AUDUSD Four-Hour Price Chart

audusd price aud/usd four hour price chart

USDCAD Remains in Range: Bounce From Support Moves Towards Resistance

USDCAD remains of interest and with Canadian CPI numbers on the economic calendar for tomorrow, there will likely be some continued volatility here.

USDCAD has remained in a range over the past week; and prices put in a quick resistance test earlier this week, followed by a push down to support around the 1.3236-1.3259 area. That level has since helped to hold the lows and prices are now pushing back-towards prior resistance. A hold of resistance in the zone that runs from 1.3361-1.3385 can keep the door open for short-side strategies in the pair.

USDCAD Four-Hour Price Chart

usdcad price usd/cad four hour price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q4 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

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DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

— Written by James Stanley, Strategist for

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GBPUSD Price Limited as BOE Remains Sidelined by Latest Brexit News

Talking Points

Without a new Quarterly Inflation Report, the Bank of England had little choice but to sit on their hands and keep policy in check all-around.

In what may have been the quietest reaction in several years, GBPUSD traded in a 20-pip range immediately after the rate decision was announced.

Retail traders are mixed on the British Pound, but have been trimming net-long positioning in recent days.

Looking for longer-term forecasts on the US Dollar? Check out the DailyFX Trading Guides.

It should come as no surprise to anyone that the Bank of England kept rates on hold today. Such an economic and/or financial environment wrought with interference from UK domestic politics has left little room for the BOE’s Monetary Policy Committee to operate, one way or the other. The reaction by GBPUSD says it all: within the first 10-minutes of the announcement, the range was a mere 20-pips between 1.3108 and 1.3128.

Expectations were Low for the BOE Meeting

According to overnight index swaps, rates markets were pricing in a 0% chance of a move in either direction today. After the March BOE meeting, rates markets were pricing in a 17% chance of a 25-bps rate hike and a 2% chance of a 25-bps rate cut by the end of the year. In other words, the rate outlook has been and remains neutral.

Brexit Latest – Extension Likely, but Not Guaranteed

With the specter of a potential no deal, “hard Brexit” lingering as the March 29 deadline approaches, UK PM Theresa May finds herself pleading with EU officials in Brussels for an extension. While EU officials have been open to the idea of an extension, we haven’t seen the UK and EU come eye-to-eye yet on an exact date. The issue of the EU parliamentary elections in early-July is in play, as the EU would prefer to have the UK out of the union before the elections take place.

GBPUSD Price Chart: Daily Timeframe (June 2018 to March 2019) (Chart 1)

GBPUSD Price Limited as BOE Remains Sidelined by Latest Brexit News

While implied volatility levels have started to spike for various GBP-crosses, perhaps taking a step back and looking at the big picture is more important. After all, since the bearish outside engulfing bar set on June 14, 2018, GBPUSD has spent more than 92% of its time trading between 1.2660 and 1.3365 (that is, price was within said range at some point during the trading day).

With all of the Brexit headlines swirling about, traders may feel that it’s best to wait for definitive news and a definitive range break before staking out a significant position.

Read more: Gold Price Forecast Brightens amid Drop in US Treasury Yields


Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail at

Follow him on Twitter at @CVecchioFX

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Brexit Gridlock Likely to Keep BoE Rates Unchanged

BoE Interest Rate Announcement Talking Points

  • UK economic data
  • UK political landscape
  • Key takeaways from the previous Bank Rate announcement

The Bank of England will wait and see how Brexit unfolds before deciding its next move on interest rates given that inflation is “reasonably well behaved”, BOE rate-setter Michael Saunders said at a conference at Imperial College London at the beginning of the month. The need for monetary tightening in the future does not mean it needs to take place now. A range of alternative Brexit outcomes are possible, and there may be very different implications for the British economy and its monetary policy.

Sterling (GBP) is not expected to have any major directional push after the announcement as most of its focus continues to be on Brexit. GBPUSD remains weak despite the FOMC’s dovish outlook yesterday.

US Dollar Dives After March FOMC Meeting Reveals Dovish Fed.

GBPUSD Daily Price Chart

GBPUSD daily price chart before Bank of England rate announcement

UK Economic Data

Despite the uncertainty surrounding Brexit, employment has hit its highest level since 1971 and wages are increasing at their fastest rate in ten years, giving the British economy a more positive note after months of negative economic figures. The BOE downgraded their growth forecasts to 1.2% (2019) and 1.7% (2020) last month, the biggest reduction in GDP since 2016, representing the weakest annual growth since 2009.

The rise in food and alcohol prices pushed inflation to 1.9% in the month of February, up from 1.8% in January and retail figures published today have been better than expected, with retail sales 0.4% higher in February than in January with a strong increase in fuel and online shopping.

Sterling (GBP) Slips on Renewed Brexit Confusion, UK Inflation Stable.

But some economists believe that this positive run may be short-lived as turmoil surrounding Brexit continues to rattle Sterling.

UK Political Landscape

After rejecting both a deal presented by PM Theresa May and a no-deal Brexit, the UK is set to push back Brexit for another 3 months. Theresa May came back from Brussels yesterday with a concession from the European Parliament, whereby they are prepared to accept a short-term delay of three months if she is able to gain the support from the British Parliament of her withdrawal agreement, which has already been widely rejected twice. It is not clear if the PM will have the support to pass her deal, given that she is even allowed to bring it back to Parliament, after Parliamentary Speaker John Bercow ruled out Theresa May being able to bring her agreement to Parliament for a third vote unless it has “substantial changes”.

Regardless of the outcome on Brexit, the BOE’s reaction may not be instant as it will always try and focus on its main goal of maintaining the 2% inflation target.

Key Takeaways From the Previous Bank Rate Announcement

Q1 2019

Q1 2020

Q1 2021


1.5% (Prev. 1.8%)

1.3% (Prev. 1.7%)

1.7% (Prev. 1.7%)


1.8% (Prev. 2.2%)

2.3% (Prev. 2.4%)

2.1% (Prev. 2.0%)

Bank Rate

0.7% (Prev. 0.8%)

0.9% (Prev. 1.1%)

1.0% (Prev. 1.3%)

IG Client Sentimentshows GBPUSD retail traders are 51.0% net-long, a bearish contrarian bias. However, recent daily and weekly positional changes give us a stronger bearish bias for GBPUSD.

Recommended Reading

Eurozone Debt Crisis: How to Trade Future Disasters – Martin Essex, MSTA, Analyst and Editor


— Written by Daniela Sabin Hathorn, Junior Analyst

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S&P 500 Backing into Support, Dow Jones & Nasdaq 100 Chart Outlook

S&P 500/Dow Jones/Nasdaq 100 Technical Highlights:

  • S&P 500 backing into prior resistance, now support
  • Dow Jones remains the laggard, below resistance
  • Nasdaq 100 is unrelenting, but can it continue to lead?

Check out the numerous forecasts and educational content offered on the DailyFX Trading Guides page.

S&P 500 backing into prior resistance, now support

The 2800/17 region was a big area of resistance for the S&P 500 not long ago, the zone started building its relevance back in October. Early this week the market snuck above it and now we’re already in a retest of this important area. It would have been more ideal for the sake of clearance to have traded higher before the retest, but nevertheless the zone was breached.

Helping give this zone some reinforcement is a trend-line off the December low. It’s not the sturdiest of trend-lines given the distance between the two inflection points and the fact it only has the bare minimum number to even create a trend-line, but it’s still a source of support.

How the market behaves here will be important. Can it hang on and use the confluent levels/lines as support, or will we see a sinking back below and changing of the chart-scape? For now, abiding by the rule of old resistance becomes support, along with the rule of thumb that support is to be trusted until broken.

A solid hold here and shove higher will bring into light the possibility of a test or better of the record high. A breakdown and we’ll have to evaluate the severity of the break and whether a larger decline may be in the works.

Stocks are rallying, but will it last in the long-term? Find out where our analysts see stocks headed in the Global Equities Forecast.

S&P 500 Daily Chart (Old resistance, new support)

S&P 500 daily chart, old resistance, new support

Dow Jones remains the laggard, below resistance

The Dow unsurprisingly pulled off with a little more vigor than the S&P and the Nasdaq 100, which actually rose. It’s been a severe laggard for a few weeks now and not helping is price and trend-line resistance aligning over the 26k-mark. If the broader market is to weaken (i.e. S&P fall below 2800) then the Dow remains the go-to short for as long as it continues to demonstrate relative weakness and abides by resistance.

Dow Daily Chart (relative weakness, resistance)

Dow daily chart, relative weakness, resistance

Nasdaq 100 is unrelenting, but can it continue to lead?

The Nasdaq 100 continues to forge on which is a good sign for the market, but it is becoming extended. It’s also becoming extended into what could amount to a significant test of a long-term trend-line, starting back in June 2016. Nevertheless, as long as the NDX continues to generally lead the way then it is a target for longs on dips/consolidations.

Nasdaq 100 Daily Chart (can it continue to lead?)

Nasdaq 100 daily chart, can it continue to lead?

To learn more about U.S. indices, check out “The Difference between Dow, Nasdaq, and S&P 500: Major Facts & Opportunities.” You can join me every Wednesday at 10 GMT for live analysis on equity indices and commodities, and for the remaining roster of live events, check out the webinar calendar.

Tools for Forex & CFD Traders

Whether you are a beginning or experienced trader, DailyFX has several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

—Written by Paul Robinson, Market Analyst

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EURUSD Price Hitting Resistance But Sentiment Remains Bullish

EURUSD Price, Chart, Pivot Points and FOMC:

Q1 2019 EUR Forecast and USD Top Trading Opportunities

The Euro is currently in vogue as ‘the cleanest shirt in the laundry basket’ as the US dollar moves lower after a dovish FOMC meeting while Sterling still struggles with a lack of leadership from UK PM Theresa May.

Wednesday’s FOMC meeting saw the Fed downgrade economic growth and inflation forecasts and confirm that it will stop bond sales after September and taper its sales before this date. This ending earlier of the balance sheet reduction program gave the market another dovish jolt, pushing US Treasury yields lower. The 10 UST now yields 2.51%, the lowest level since January 2018, while the 30-year UST yields 2.96%, nearly 50 basis points than levels seen in October 2018. Lower bond yields feed through to a weaker currency.

US Dollar Dives After March FOMC Meeting Reveals Dovish Fed.

EURUSD Technical Analysis:

EURUSD touched a six-week high post-FOMC but backed-off the 200-day moving average around 1.1450. This dma will act as primary resistance in the short-term, while yesterday’s print may well have broken the sequence of lower highs seen since the start of the year. The early fade seen in the price today should find support from the 50-day moving average around 1.1350.

EURUSD Price Hitting Resistance But Sentiment Remains Bullish

EURUSD Landing Page with Price Analysis, Charts, Pivot Points and Latest News and Views.

EURUSD Daily Price Chart (June 2018 – March 21, 2019)

EURUSD Price Hitting Resistance But Sentiment Remains Bullish

EURUSD Retail Sentiment – Bias Remains Bullish

Retail traders are 37.7% net-long EURUSD according to the latest IG Client Sentiment Data, a bullish contrarian indicator. Recent changes in daily and weekly sentiment – net-short positions are 27.7% higher than last week – however give us a stronger contrarian bullish bias for EURGBP.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on EURUSD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

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Yen May Rise as Dovish SNB, BOE Add to Global Slowdown Worries


  • US Dollar on the defensive after unexpectedly dovish FOMC policy call
  • Yen may rise in risk-off trade as dovish SNB, BOE stoke slowdown fears
  • Aussie, New Zealand Dollars may trim data-driven APAC session gains

The US Dollar underperformed in Asia Pacific trade, reeling in the wake for the Fed policy announcement. Scope for a dovish surprise was clearly greater than expected. Besides the anticipated downgrade of growth, inflation and rate hike expectations, officials cut QT asset sales from $50 to $35 billion per month (starting in May) while the policy statement hinted the FOMC’s next move may well be a cut.

The response from sentiment trends was perhaps more interesting than that of the Greenback however. Wall Street initially swung higher, buoyed by the promise of looser credit conditions, but the bellwether S&P 500 soon reversed to close with a loss as the Fed’s defensive stance stoked global slowdown fears. An analogous pattern appeared on Asia Pacific bourses.


Such worries may be amplified if incoming policy pronouncements from the SNB and the Bank of England reinforce the sense that global monetary officialdom is collectively downbeat about the business cycle. To the extent that this stokes broad de-risking – an outcome already hinted by an APAC-hours drop in US stock index futures – the anti-risk Japanese Yen and even beleaguered USD may find support.

The Australian and New Zealand Dollars have managed standout performance before the opening bell in Europe, buoyed by supportive local economic data. Australia’s jobless rate fell to an eight-year low while New Zealand’s fourth-quarter GDP data showed growth picked up in the fourth quarter (albeit in line with consensus forecasts). Market-wide risk aversion may see these gains trimmed however.

What are we trading? See the DailyFX team’s top trade ideas for 2019 and find out!


Yen May Rise as Dovish SNB, BOE Add to Global Slowdown Worries

Earlier in the week, the S&P 500 appeared to be showing signs of topping. Further evidence of an imminent downturn now seems to be on display, with prices showing a bearish Evening Star candlestick pattern coupled with negative RSI divergence. A daily close back below the 2814-25 area may offer preliminary confirmation and suggest that a sustained risk-off reversal is underway across global markets.


— Written by Ilya Spivak, Currency Strategist for

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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Crude Oil Prices May Retreat as Central Banks Stoke Growth Fears


  • Crude oil prices rise as US inventories fall most in 8 months
  • Gold prices advance on unexpectedly dovish Fed policy call
  • Downbeat SNB and BOE may stoke global slowdown fears

Crude oil prices soared as EIA inventory flow data revealed an unexpectedly large 9.59-million-barrel drop in stockpiles. That marks the largest one-week drawdown in eight months. Gasoline and distillate storage also shrank more than analysts projected.

Gold prices rose as the Federal Reserve took a more dramatically dovish turn in both policy and guidance than investors anticipated. Officials slashed growth and inflation forecasts while dropping the previously projected pair of interest rate hikes from their 2019 outlook.

This mostly matched the priced-in view prevailing in the markets and might’ve passed with little fanfare. Language in the FOMC policy statement implying that the next rate move may be down as well as the tapering of QT asset sales from $50 to $35 million per month marked potent surprises however.


Looking ahead, concerns about global economic growth may dominate the spotlight. Wall Street tellingly failed to sustain post-Fed gains as the central bank’s defensive posture stoked slowdown fears, ending the day with a loss. A similar pattern emerged in the Asia Pacific trade.

Another round of worried remarks from monetary officialdom may come via incoming policy announcements from the SNB and the Bank of England. Cycle-sensitive oil prices may retreat while gold gains against the backdrop of lower bond yields if this encourages more hang-wringing from investors.

See our guide to learn about the long-term forces driving crude oil prices!


Gold prices broke above resistance in the 1303.70-10.95 area, opening the door for a test 1326.30. A daily close above that exposes February’s swing high at 1346.75 anew. Alternatively, a turn back below 1303.70 puts the would-be neckline of a Head and Shoulders top – now at 1282.11 – back in the crosshairs. Breaching below that may signal a major top and set the stage for a move toward $1220/oz.

Gold price chart - daily


Crude oil prices breached resistance marked by the 50% Fibonacci retracement at 59.63. The next near-term upside barrier comes in at 60.45, the 38.2% Fib expansion, followed another minor hurdle at 62.28. A truly potent obstacle awaits in the 63.59-64.43 area however, marked by a major former support as well as the 61.8% retracement and expansion levels. Alternatively, a turn back below 59.63 eyes the 57.24-88 zone.

Crude oil price chart - daily


— Written by Ilya Spivak, Currency Strategist for

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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Asia Stocks Follow Wall Street Response to FOMC, FTSE 100 Eyes BoE

Asia Pacific Markets Wrap Talking Points

  • Asia stocks traded mixed, like S&P 500 reaction to FOMC
  • ASX 200 fell as local jobs report reduced dovish RBA bets
  • GBP/USD, FTSE 100 eye Bank of England and Brexit saga

Find out what retail traders’ equities buy and sell decisions say about the coming price trend!

Asia Pacific markets lost most of their upside momentum heading into the European trading session. This followed a decidedly more dovish Fed rate decision which resulted in a mixed reaction on Wall Street. In the end, the S&P 500 closed to the downside as markets balanced a pause in tightening with pessimistic economic projections.

Japan’s Nikkei 225 rallied as much as 0.6%, but then trimmed gains heading towards the close. China’s Shanghai Composite fared better, with gains sustaining above 0.5%. South Korea’s KOSPI traded little changed. In Australia, the ASX 200 was down over 0.4%. This may have been due to February’s Australian jobs report.

Despite a rather lackluster outcome, where the nation added fewer jobs as the unemployment rate fell for potentially the wrong reasons, AUD/USD soared with rising front-end government bond yields. This reflected ebbing RBA rate cut bets, which bodes ill for Australia’s benchmark stock index. With that in mind, it will probably take significantly more dismal local economic data to revive dovish expectations (see chart below).

Fed, RBA 2019 Rate Cut Bets

S&P 500 futures are little changed as markets now face the Bank of England monetary policy announcement. Given the reaction today to the Fed, it is unclear what a more cautious central bank could mean for equities. Meanwhile, let’s not forget that GBP/USD and FTSE 100 are also overshadowed by the ongoing Brexit saga which has lately taken a toll on it.

FX Trading Resources

— Written by Daniel Dubrovsky, Junior Currency Analyst for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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Caveats to a EURUSD Break and Questions for S&P 500 Slip After Fed

FedTalking Points:

  • The Fed took a more dovish shift than was expected when it dropped all expectations of a hike in 2019 and stated QT ends in September
  • Via the old formula, a more accommodative central bank would spur risk trends, but the S&P 500 very clearly closed lower on the day
  • EURUSD has a high profile technical clearance but the Euro is as embroiled as GBPUSD in Brexit uncertainty – my interest is USDJPY

See how retail traders are positioning in EURUSD after the break, GBPUSD between Fed and Brexit, Gold as it plays unique safe haven along with the rest of the FX majors, indices, and oil intraday using the DailyFX speculative positioning data on the sentiment page.

The Fed Caps the Global Effort to Normalize Extreme Easing

After years of making a concerted effort to carefully shape market expectations for its monetary policy intent, the Federal Reserve still managed to catch the financial system (and me) off guard. In its ‘quarterly’ event, the US central bank kept to the script when it came to its benchmark monetary policy tool. The Fed Funds rate range was kept unchanged between 2.25 and 2.50 percent as widely expected – in fact, there was a slight speculation in Fed Fund futures that it could be a rate cut. The surprises arose from the details. Alongside the rate decision, the group released its updated quarterly forecasts. Most seized upon the group’s interest rate outlook which now shows the majority projecting no changes to the benchmark through 2019. Back in December, the outlook was for two hikes – down from three in September. Given that the market was forecasting an approximate 25 percent probability of a cut before year’s end through Fed Fund futures, there was naturally anticipation that it would lower the target. Halting rates for this year and only projecting one further 25 basis point move in the following two-year span is an unmistakably dovish outcome. Further details on plans to level out the balance sheet after more than a year of slow reductions is another explicitly dovish development.

Chart of the DXY Dollar Index and Implied Yield from December Fed Funds Contract (Daily)

Caveats to a EURUSD Break and Questions for S&P 500 Slip After Fed

The Fed’s policy reversal in the past six months marks a critical milestone in global policy. We have seen the ECB recently curb its normalization efforts before they even got off the ground with the introduction of its third round of TLTRO. The Bank of Japan’s minutes released Wednesday morning showed the most dovish major central bank is at a loss as to what to do next to help foster growth and inflation that it has thus far failed to secure despite a seemingly unlimited stimulus effort. In short, the global central bank effort has moved fully away from the intent to slowly back away from the emergency policies that followed the Great Financial Crisis a decade ago. In years past, this would throw fuel on speculators’ fires. This could still happen today, but the markets are proving to be far more introspective now than they were in the heydays of moral hazard and the ‘complacency bid’. What would be truly worrying is if this overt transition to offer support returns no confidence. If markets were to falter despite the additional support, that unusual skew would act like a beacon for concern.

Caveats to a EURUSD Break and Questions for S&P 500 Slip After Fed

Not the Easy S&P 500 Nor EURUSD Trade Such Events Used to Inspire

With the Fed’s policy shift, we had a very clear reaction from the US Dollar. The DXY tumbled when the central bank dimmed the currency’s carry trade star. While there isn’t much carry trade built into the FX market over the past decade owing to the persistently low rates of return on a historical basis, the Dollar is still operating on a premium for its own speculative appeal. The rally in 2014 in advance of the first Fed hike is still built into the currency’s present level. That means it can certainly lose traction. I am also generally bearish on the Dollar for growth considerations, the slow loss of its reserve status and side effects of its instigating trade wars. Yet, that does not mean the Greenback is destined to tumble nor that all majors are fair game. Even with the downgrade in rate forecasts, the Dollar maintains a considerable yield advantage relative to its major counterparts. In this case, the counterpart is particularly important. Where DXY is still holding up its 200-day moving average and 10-month trendline support as of Thursday’s open, EURUSD cleared its own trendline resistance above 1.1365. GBPUSD actually fell, USDJPY broke support in its bullish channel and USDCAD was ultimately little changed. If the Dollar is marking so little progress across most the market, is it reasonable to expect EURUSD to continue to run? That depends on the Euro, and that may be misplaced optimism.

Chart of EURUSD (Daily)

Caveats to a EURUSD Break and Questions for S&P 500 Slip After Fed

Expectations surrounding ‘risk trends’ in the wake of the Fed are more readily grounded. There are certain risk assets that have responded favorably to the accommodative shift from the world’s largest central bank. Junk bonds climbed quickly as the competition from blue chips was tempered under a more reasonable rate trajectory. The EEM emerging market ETF managed a climb but its progress was notably truncated on the chart – EM currencies fared better thanks to the Dollar’s troubles. Yet, the most favorably positioned market, US equities, didn’t even muster a gain through Wednesday’s close. The S&P 500 already earned its bullish break at the beginning of the week, and this event wouldn’t even capitalize on the opening move. If this benchmark index (along with the Dow and Nasdaq) continues to spin its tires this week – or actually loses ground – it will stand as a glaring disconnect to the norms expected in a connection between central bank policy and risk appetite. Should that generous safety net and speculative whip fizzle, it can put the better part of a decade’s climb in jeopardy.

Chart of S&P 500 and 100-day Moving Average (Daily)

Caveats to a EURUSD Break and Questions for S&P 500 Slip After Fed

Other Themes and Markets That Shouldn’t Be Missed in the Wake of the Fed

While the Fed’s course change is very important to the global financial system and economy – not to mentionthe shape of the speculative environment – it isn’t the only issue driving volatility or technical cue tempting trade interests. The Pound was once again a top mover – dropping more aggressively than all its major counterparts (even seeing GBPUSD drop). With the third meaningful vote in Parliament on the Brexit proposal already iced by the Speaker of the House of Commons, the interest now was pure, unscheduled headlines. Prime Minister May made official that the Brexit wouldn’t take place on March 29th and she was seeking an extension of negotiations only until June 30th. She reiterated it was ‘her deal, no deal or no Brexit at all’, but these warnings are increasingly falling on deaf ears. The EU Summit today and tomorrow will almost certainly dedicate the majority of its time to this messy divorce. This is as much an issue for the Euro as the Pound, so keep tabs on the EURGBP for implied volatility. Furthermore, don’t expect too much from the BOE decision or ECB bulletin unless they are remarkable enough to override a situation as complicated and wide reaching as Brexit.

Chart of EURGBP and 10-Day Average True Range (Daily)

Caveats to a EURUSD Break and Questions for S&P 500 Slip After Fed

In more discrete news, the New Zealand Dollar extended a climb through the morning following otherwise unremarkable GDP figures. NZDUSD is working on a breakout, but other Kiwi crosses may see their ambition checked by counterparts. The Australian Dollar had employment figures this morning but the miss on the headline change does little to amplify AUDUSD or offset AUDNZD momentum. The RBA minutes were also a detriment to bulls’ cause. Aside from the BOE, there is another European rate decision ahead: the Swiss National Bank (SNB). The market has all but written off the influence of this authority as it holds deep in negative rates. This event is unlikely to pass with a change and that will keep the Franc a pliable counterpart for more active currencies. If there is a surprise, though, it could generate considerable volatility as it is largely unexpected. In commodities, gold remains the most important measure in my book as it measures the deep risk aversion born of the erosion in financial stability but not yet generating pain in headline assets. Crude oil, on the other hand, is the more impressive technical picture at the moment. The market overtook the midpoint of its fourth quarter tumble but does so with limited momentum. Risk trends probably played the bigger role here post Fed but the biggest draw in US inventories (9.6 million barrels) probably contributed a little support. We discuss all of this and more in today’s Trading Video.

If you want to download my Manic-Crisis calendar, you can find the updated file here.

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