FOMC-Fueled USD Runs into Resistance: GBP/USD, EUR/USD Primed

Talking Points:

– Yesterday’s FOMC rate preference saw a bank announce a start of change piece rebate in Oct along with a expectancy for another rate travel in December.

– This constructed a discerning hitch of USD-strength that lasted for about 10 mins into Chair Yellen’s presser, during that prove insurgency showed and has continued to hold. Does this new information have a intensity to retreat a Greenback’s 2017 down-trend?

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Yesterday brought a widely-awaited Federal Reserve rate decision, and during that assembly a bank announced that change piece rebate would start in October. This wasn’t unequivocally a surprise, as a Fed has been articulate about this given March. But what competence have been a bit some-more astonishing was only how hawkish a Fed incited out to be in terms of forward-looking rate expectations in a face of a tumble seen with acceleration around this year. Earlier in a year, Chair Yellen pronounced that she suspicion a dump in acceleration was transitory; though a continued loiter in prices seems to prove that whatever we’re saying is a bit some-more than transitory. Nonetheless, a Fed reiterated their perspective on rate expectations to a finish of 2018.

The Fed pronounced that they’re awaiting one some-more travel this year, 3 some-more subsequent year, dual in 2019 and one in 2020. If this goes by as planned, a Federal Reserve calculates a final end for rate policy, or a depot rate to arrive during a operation of 2.75-3% during some prove in 2020. This would be significantly next longer-term chronological averages for seductiveness rates so, in essence, it still displays a spirit of dovishness. This also looks to residence fears of ‘over-tightening’, that seem to be designed to soften bond investors and bound income traders that competence consider twice about carrying fixed-income bearing in a rising rate environment.

The near-immediate response to yesterday’s FOMC rate preference was a discerning cocktail of USD-strength that lasted for about 10 mins into Chair Yellen’s press conference. As DXY ran into insurgency around a 92.50-92.60 area, a operation began to uncover as we changed into a Asian session, with a discerning dump entrance in around a European open. Does this have a makings of a immature bullish trend? It’s still too early to say, though this area of insurgency would initial need to produce before such a unfolding competence seem likely.

U.S. Dollar around ‘DXY’ Four-Hour: FOMC-Fueled USD Pop Up to Resistance

FOMC-Fueled USD Runs into Resistance: GBP/USD, EUR/USD Primed

Chart prepared by James Stanley

Shortly after a Fed announced their vigilant to start pleat a change piece in October, the Bank of Japan reiterated their heated dovish stance. This serve highlights a flaw among large, tellurian Central Banks as we see tightening efforts nearby or underway in most of a grown universe while a Bank of Japan continues with a large impulse program. This can also imply continued debility in a Yen, as a BoJ is one of a few Central Banks that isn’t starting down some form of emanate with acceleration as expansion starts to uncover a bit some-more consistently. In Japan, acceleration continues to loiter well-below a bank’s 2% goal, and notwithstanding a fact that those idea posts have been shifted after now 6 times, a BoJ continues to design to finally strike that aim in a year 2020.

This additional expostulate of Yen weakness, total with USD-strength emanating from FOMC helped USD/JPY to pierce adult to exam a pivotal insurgency section that runs from 111.61-112.43.

USD/JPY Four-Hour: Resistance Zone Test after FOMC, BoJ

FOMC-Fueled USD Runs into Resistance: GBP/USD, EUR/USD Primed

Chart prepared by James Stanley

The above dual drivers can open a doorway to a integrate of engaging scenarios. For traders that wish to blur this new collection of USD-strength underneath a expectation of a longer-term bearish trend continuing, bullish setups in EUR/USD and GBP/USD could be attractive.

We’ve been following a pivotal area of support in Cable that’s held-up good given final week’s BoE meeting. This is a 50% retracement of a ‘Brexit move’ in GBP/USD, and this turn during 1.3478 has continued to reason a lows given final week’s bullish breakout.

GBP/USD Hourly: Fibonacci Support with Subordinated Support Applied

FOMC-Fueled USD Runs into Resistance: GBP/USD, EUR/USD Primed

Chart prepared by James Stanley

We discussed a short-term range-like arrangement display in EUR/USD after a span unsuccessful to take out a 1.2100 level. Yesterday’s discerning collection of USD strength brought prices down to a support distance of that range, that has, during slightest so far, held-up with a somewhat aloft low. This can open a doorway to bullish setups underneath a expectation that new highs competence be on a radar.

EUR/USD Four-Hour: Short-Term Range At Top of Longer-Term Trend

FOMC-Fueled USD Runs into Resistance: GBP/USD, EUR/USD Primed

Chart prepared by James Stanley

For USD-strength continuation, USD/JPY can sojourn as attractive. As we looked during above, that insurgency section from 111.61-112.43 is in a routine of being tested. This can concede for traders to demeanour for higher-low support if looking to position-in forward of a intensity bullish delay move. On a draft below, we’re looking during 3 intensity support zones above a before swing-low.

USD/JPY Hourly: Shorter-Term Support Potential Within Longer-Term Resistance Zone

FOMC-Fueled USD Runs into Resistance: GBP/USD, EUR/USD Primed

Chart prepared by James Stanley

— Written by James Stanley, Strategist for DailyFX.com

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