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FOREX: Greenback Soars on Outright Hawkish Fed, USD Index at Two-Year Highs

FOREX
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  • A hawkish dissent, matched with an outright hawkish set of projections from the FOMC has prompted substantial dollar gains late Wednesday, with the USD index soaring to the highest level in two years.
  • Chair Powell added little throughout his press conference and as such, we have seen consistent demand for the greenback, bolstered by the weakness for major equity benchmarks and front-end yields rising over 10 basis points.
  • Sentiment has weighed heavily on higher beta currencies, with the likes of AUD and NZD underperforming against the dollar in G10.
  • AUDUSD is now down 1.66%, with momentum building on a break of 0.6270, with the pair trading at a fresh two-year low. The trend needle in AUDUSD continues to point south and this week’s fresh cycle lows reinforce current conditions. Sentiment may have also been aided by the most recent RBA dovish pivot.
  • The move down maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Below here, attention will be on 0.6210, the Oct 21 ’22 low.
  • EURUSD (-1.25%) slides back below 1.0400 in sympathy with the broader bid in the dollar and risk off tone, with recent gains appearing to have been a correction. Price action has seen spot substantially narrow the gap to key support at 1.0335, the Nov 22 low and bear trigger. Below here, 1.0311 and 1.0258 are notable targets, both Fibonacci projections.
  • For USDJPY, the weakness for stocks and the close proximity to the Bank of Japan decision overnight has limited gains to just 0.75%. We have printed fresh recovery highs, but remain just shy of 154.84, a Fibonacci retracement level. 156.75, the Nov 15 high and the bull trigger remains the key topside mark.
  • After the BOJ on Thursday, central bank decisions in Sweden, Norway and the UK are all scheduled.
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  • A hawkish dissent, matched with an outright hawkish set of projections from the FOMC has prompted substantial dollar gains late Wednesday, with the USD index soaring to the highest level in two years.
  • Chair Powell added little throughout his press conference and as such, we have seen consistent demand for the greenback, bolstered by the weakness for major equity benchmarks and front-end yields rising over 10 basis points.
  • Sentiment has weighed heavily on higher beta currencies, with the likes of AUD and NZD underperforming against the dollar in G10.
  • AUDUSD is now down 1.66%, with momentum building on a break of 0.6270, with the pair trading at a fresh two-year low. The trend needle in AUDUSD continues to point south and this week’s fresh cycle lows reinforce current conditions. Sentiment may have also been aided by the most recent RBA dovish pivot.
  • The move down maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Below here, attention will be on 0.6210, the Oct 21 ’22 low.
  • EURUSD (-1.25%) slides back below 1.0400 in sympathy with the broader bid in the dollar and risk off tone, with recent gains appearing to have been a correction. Price action has seen spot substantially narrow the gap to key support at 1.0335, the Nov 22 low and bear trigger. Below here, 1.0311 and 1.0258 are notable targets, both Fibonacci projections.
  • For USDJPY, the weakness for stocks and the close proximity to the Bank of Japan decision overnight has limited gains to just 0.75%. We have printed fresh recovery highs, but remain just shy of 154.84, a Fibonacci retracement level. 156.75, the Nov 15 high and the bull trigger remains the key topside mark.
  • After the BOJ on Thursday, central bank decisions in Sweden, Norway and the UK are all scheduled.