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Sharp Greenback Weakness As Fed Projections See 3 Cuts Next Year

FOREX
  • The US dollar sold off aggressively in the direct aftermath of the Fed rate decision and release of its summary of economic projections. With the median dot plot forecasting three rate cuts in 2024 and an acknowledgement that inflation is easing, the greenback remained under pressure throughout the late US session, with the USD index down roughly 0.85% as we approach the APAC crossover. Broad greenback weakness consolidated as Chair Powell delivered little to no pushback to market expectations of significant rate cuts next year.
  • USDJPY extended losses to as much as 1.95% on the session, briefly breaking back below the 143.00 handle and printing a low of 142.65. As a reminder, last week’s impulsive sell-off confirmed the break of trendline support drawn from the Mar 24 low. This strengthens a bearish threat and signals scope for a continuation lower towards 140.71 next, a Fibonacci retracement point. In between that level and the current spot rate, attention should be paid to 142.50 & 141.71, the Dec 8 low and the bear trigger respectively.
  • The beneficial price action for equities and waning greenback sees AUD among the best performers on the G10 leaderboard, registering gains of roughly 1.65% on the session.
  • The uptrend in AUDUSD remains intact, and moving average studies remain in a bull-mode set-up, highlighting this bullish theme. The bull trigger has been defined at 0.6691, the Dec 4 high. Clearance of this level would confirm a resumption of the uptrend. Above here, markets will focus on 0.6747, the 76.4% retracement of the Jul 13 - Oct 26 bear leg.
  • New Zealand GDP and Australia employment data kicks off Thursday’s docket. Focus then turns to central bank decisions from the SNB, Norges Bank, BOE and ECB. Additionally, US retail sales data is scheduled.
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