Fed Gives Dollar a Smack

Yesterday"s Trading:

The USD on Wednesday weakened throughout the market. The Fed decided to keep their interest rate at 0.25-0.50%. It was announced that the rate is to be raised twice this year, and not four times as was said earlier. It is this that caused a sharp fall of the dollar.

The Kansas Fed president George voted to lift rates by 0.25%, with the other 9 voting to keep things unchanged. The forecast for the economy and inflation was dropped. After Yellen spoke, experts began saying that the Fed is setting things in motion for rates to be dropped.

US stats came out mixed. The US industrial production index for February stood at -0.5% (forecasted: -0.1%, previous: 0.8%).

The US CPI for February was -0.2% (forecasted: -0.2%, previous: 0.0%). The CPI which doesn"t take food and energy prices into account for the month was 0.3% (forecasted: 0.2%, previous: 0.3%).

Housing construction in the US for February stood at 1.178 million (forecasted: 1.153 million, previous: 1.120 million). There were 1.167 million construction permits issued (forecasted: 1.205 million, previous: 1.202 million).

Market Expectations:

On Thursday the key event of the day for the currency market is the Bank of England"s meeting. The bank is set to keep its interest rate and asset purchases at previous levels. No surprises are expected. I reckon the euro/dollar pair will continue to rise to 1.1280.

Day"s News (EET):

12:00, Eurozone February CPI and January balance of trade figures.

14:00, BoE interest rate and asset purchasing decision, along with BoE minutes.

14:30, US balance of trade for Q4, initial unemployment benefit applications and Philadelphia Fed PMI for March.

Technical Analysis:

Intraday target maximum: 1.1280, minimum: 1.1205 (current Asian), close: 1.1255.

Intraday Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term for last 10 weeks: 103 points (4 figures).

After the Fed meeting, the euro/dollar headed above the U3 (upper limit of the MA channel). This line will keep the euro from strengthening further. To shift higher, we will need to see the rate hold at its current level for 6 hours. The MA line is facing upwards, so in 6 hours the road to 1.1280 will open up.

By: Vladislav Antonov