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Dean's Daily FX Update – 27 July 2017
In the Zone
- USDJPY
- USDZAR
- Gold
- Silver
- Oil
Recap
Another day has come and gone, the cloud hanging over Washington does not look as though as it is going to clear up anytime soon. The market did wait for the FOMC statement to be read and as expected it is was rather neutral, although the Fed was not overly hawkish – it was definitely not dovish and although they probably did the right thing to keep the message neutral, my only criticism is that they could have been a little bit more transparent.
The market almost wanted to know the exact date of the next interest rate hike, and they also wanted to know when tapering of the balance sheet would begin, is this a little unfair of the market – absolutely. My interpretation of this statement is that we see tapering start in September, with another hike in December, the market has chosen to dump the dollar although I do believe that a large part of the move is the political scandals unfolding in the US.
The EURUSD couldn’t catch a break, we highlighted that the previous resistance level of 1.1615 and that the level would become near term support. We had the test yesterday and the weak dollar coupled with comments out of the ECB yesterday meant that the market found some support at these levels and immediately the pair bounced. The pair has traded above the 2015 high of 1.1711, the next target could very well be the 200 week MA at 1.1795.
I mentioned in the afternoon video that I wondered of the USDCHF was given us a sneak preview into the FOMC. While all the pairs traded in a range bound nature yesterday, the USDCHF was off to the races and the pair weakened all the way to 0.9600 – rumour is that the SNB was the reason for this move, I have highlighted before that I do not trade CHF pairs because of central bank intervention. The inevitable move lower did realize after the Fed and the pair settled at 0.9500.
With likely interest rate policies diverging the commodity currencies such as the NZD and AUD really should be weakening. For now the political fears in the US are taking precedence and so both pairs are following a “trend is your friend” philosophy. The NZD could start to target much higher, while the AUD will likely eye 0.8160, once the cloud in Washington has lifted, these are the two pairs that could possibly feel the brunt of any dollar recovery.
Keep an eye out for the afternoon video that tries to tie everything together.
Important Economic Data out today
14:30 USD Core Durable Goods
Consensus: 0.4%
Effect: Actual higher than expected is good for the USD
14:30 USD Unemployment Claims
Consensus: 240K
Effect: Actual lower than expected is good for the USD
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