Wild Wednesday – Market Update

What Happened on Wednesday > Top 3?

• Fed leaves US rates unchanged but FOMC statement passive
• USD sold off aggressively, Gold Surges
• Major FX pairs well Bid against USD, across the board

Outlook

• Outlook has now turned south for USD
• UK GDP data was solid so bright prospects for GBPUSD
• FOMC crunches USD bulls, more downside potential for USDJPY

Data & Event Risk Today?

• (USD) Unemployment Claims data – 10.30pm Sydney.

USDX: 93.30

Dollar Index sunk to fresh lows around 93.15 as the Fed kept rates unchanged.

The big story dragging on the USD was the Fed’s FOMC statement referring to “relatively soon” for reductions in their balance sheet.

The markets were expecting a preview of September announcement of balance sheet reduction so traders took that as a passive stance and Sold off USD.

USDJPY: 112.05

USDJPY crunched 1 big figure lower as the FOMC statement did not deliver after holding rates unchanged.

There should be more lower moves still available for USDJPY to be Offered down to around 110.80 particularly if the US jobless claims data is soft tonight also.

EURUSD: 1.1730

Euro took off beautifully smashing through the 1.1700 handle as the USD fell out of bed sharply last night.

The Eurozone outlook divergence against the stalling Fed means more upside is very possible.

Here is my quote from yesterday: “I still maintain strong bullish bias looking for moves above the June highs of 1.1718.”

Now that we have made it through that level, look for targets of 1.1800 to be met.

GBPUSD: 1.3115

Sterling ended the day Bid solidly up to 1.3130 on the back of combined powers UK GDP data being solid plus the USD selloff.

Same as per my comments from yesterday: “The GBPUSD still seems very indecisive but upside potential still looks large in my view, with a near-term target of 1.3150.”

AUDUSD: 0.8000

The Aussie dollar had a crazy day yesterday and my clients finally hit their target of 80c despite a blip lower in the Asian session on the back of the softer than expected CPI data for Australia.

Also of note was the RBA governor speech noting that Australia doesn’t have to “Hike rates in line with its global peers”. That commentary saw AUDUSD at 0.7880 before the US session & passive FOMC statement propelled a huge rally to 0.8015.

AUSD will likely take a breather around 0.8000 for now, leading into RBA Tuesday.

NZDUSD: 0.7420

The NZD had another strong day finally taking on the 7500 handle.

The upside here is enormous now, as it has been Bid to 0.07530 early today ion Asian dealing.

Look for a move to 7550 then towards 7580 as nothing of note is on the calendar for the Kiwi.

USDCAD: 1.2450

USDCAD was crunched lower from 1.2525 to lows around 1.2400 on the back of solid Oil price recovery (48.70) and USD falling out of fashion as treasury yields sold down sharply.

Where to next for the USDCAD? You have to stay with this trend, as the oil price recovery may help USDCAD get down to 1.2350.

VIX: 9.19

The VIX traded to a 23 year low yesterday, down 0.24 points to 9.19, after earlier falling to 9.04.

We haven’t seen these levels since December 1993 boosted by strong earnings season making SP500 Bid to new highs.

GOLD: $1,261

Gold sprung into like jumping from 1247 to 1261 as the USD selloff was in full swing.

Here is my quote from yesterday, which remains in play:

“Buyers will step in fiercely on the FOMC statement if any overly cautious commentary referring to inflation concerns makes it way into the Fed language.”

Look for higher highs.

Oil (WTI): $48.70

The big news for Oil again was the US Inventories data, keeping solid price action higher for Oil towards 49.00.

Can it break through $50, that is the question?

The headlines are helping Oil recover and I think that we will see $52 by next week.

Macro Themes in Play

• Aussie Dollar and Euro seem the strongest pairs against the USD.
• Treasury yields dragging on USD, evident across the board.
• USD will trade soft as the FOMC statement was passive