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Initial Greenback Strength Reverses, USD Set To Extend Downtrend

FOREX
  • An initial reaction higher in US yields and lower equities boosted the greenback with the USD index surging back to unchanged on the day, rising roughly 0.4% upon the FOMC statement release. However, throughout the press conference, this early optimism was faded and the USD index (-0.48%) is making fresh lows as we approach the APAC crossover.
  • It appears that Powell’s remarks were unable to deter market participants from the most recent USD weakening trend following yesterday’s weaker than expected US CPI report.
  • Despite the roughly 100 pip bounce for USDJPY, Tuesday's move lower signalled the end of the recent corrective phase that started on Dec 2 and the subsequent reversal potentially bolsters the likelihood of a continuation lower, opening 133.63, the Dec 2 low and bear trigger.
  • A break of this level would confirm a resumption of the current downtrend and pave the way for a move towards 132.56, the Aug 15 low. The 20-day EMA, at 138.31, remains the first key short-term resistance.
  • There are no standout performers across G10, with EUR, GBP and CHF all rising around a half a percent with the focus immediately turning to important central bank decisions on Thursday, including the Norges Bank, the SNB, the BOE and the ECB.
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