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14 June 2017 – Dean Forex Market Commentary

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Dean's Daily FX Update – 14 June 2017

In the Zone

  • AUDUSD
  • NZDUSD
  • USDCAD
  • USDJPY

Noteworthy News

  • Testimony by Attorney General Session yesterday reiterated what we learnt from Comey last week, there is no smoking gun. The market will start to move on this from now.

Recap

Judging by the price action this week, it would seem that the market is eagerly waiting the FOMC this evening. The market is fully expecting the Fed to raise rates by a further 0.25% and this is what will move the market this evening, the strength of the move will be dictated on how the market dictates the language of the press conference. Will this hike be accompanied by a dovish tone? We will also look for clues around tapering of the balance sheet – rumours are this shall start in September. We have both release of US inflation and retail sales data and these could possibly be a pre-cursor for the Fed.

The dollar was unchanged against most of the major currencies yesterday and this is typical behaviour on the day before FOMC. The exception to this was the GBP and the CAD – that both had fundamental reasons – as well as the NZD which is a little bit of an outlier at present.

For a consecutive day, we saw the Bank of Canada hold an unscheduled press statement that was not on the economic calendar. It is unusual to have one of these, but to have two in the same week is extremely odd and it raises some red flags for me. Following on from the Deputy Governor Wilkens on Monday, Governor Poloz was extremely hawkish today and this allowed the CAD to strengthen further against all the pairs. It allowed the USDCAD to move away from the 200 day MA and trade as low as 1.3210, this was the swing low stretching back to January of this year. This may create the first level of support this morning and a significant bounce today will ensure that this level goes down as double bottom.

There are some real rumours surfacing that we may see a soft Brexit this year, and judging by the change in tone out of the EU, it would definitely seem as though these comments have some merit. A soft Brexit would be supportive for the GBP and this is what we saw yesterday as the pair trended higher and the pair traded close to the key resistance at 1.2770, I would expect this pair to lose a little bit of momentum at these levels. I continue to sit out the GBPUSD as there are just too many unknown variables in this and I would prefer to look for opportunity elsewhere.

The NZDUSD strength over the last week is somewhat of a mystery, I am still looking for opportunity on all the commodity currencies as I believe that most are overdone. The Fed decision could just be the catalyst to move these pairs.

There is not going to be any daily ranges today as these could potentially trade through on the announcement this evening.

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