So the big day happened. The Federal Open Market Committee Meeting or FOMC for short. What did they do? What did they say? And what happened? And has crypto decided to wake up from a couple of days off? Well to tackle the last question first – barely. 

BTC starts the US day at $9,760 up $200 from late Tuesday and ETH sits at $213. Across the board, there are similar small moves higher but little in the way of volume. The rally then extends past $10,000 and $218 respectively on the back of an article suggesting any Bitcoin ban in the US was highly unlikely. I’m not sure there was any concern that it would be, but this market will take any positive.

Moving on to FX and equities, we had a quiet start to the day as you would probably expect ahead of the US rate announcement. Would the US ADP employment data get us moving? No. 

Coming in just a fraction better than expected at +156k was not enough to get traders excited. However, the marginally better Canadian GDP data did see USDCAD move lower from 1.3155 to 1.3110. 

Suddenly, GBPUSD decides to race higher from 1.2165 to 1.2230. And then USDCAD reverses the entire days move. Even EURUSD starts to move a little lower as the market squares up into the Fed announcement. At 2pm NY time, it is announced that the Fed has cut interest rates by 25bp. Not as much as some were looking for and EURUSD crashes to a new low around 1.1090. 

AUDUSD also makes a new recent low 0.6861. USDCAD ramps up to 1.3185. But these moves are short-lived and each reverse by 30 points in quick time. All this before the news conference. 

Equities head marginally lower as XAU drops to $1,425. The US 10Y yield drops immediately to 2.01%. The main undertone to Chairman Powell’s remarks is that the rate cut is a supportive one to help keep the economy expanding and assist in pushing inflation to 2%. 

More of an adjustment than a trend. EURUSD is back under 1.1060, the DJ is down 460 points at its worst! AUD tests support at 0.6832 and holds. GBPUSD is back down to 1.2150 and USDJPY up to 108.80. It’s a mess. The last thing this market wanted was ‘one and done’ and that’s the initial communication. When asked outright if that was the case, he refused to confirm, which provided some relief to stocks but little to the USD. We close with the USD just off its highs, but momentum is firmly in its favour. Mr. Trump will not be happy!

I could have picked a multitude of charts today but the break in EURUSD was a significant one. The break of 1.1100 initially only saw a 10 point push through, partly due to the ongoing press conference but second time around we hit 1.1060. 

Looking at this daily chart, which I have shown you before, there is little in the way of significant support until 1.0840.

Below there, it’s fresh air to 1.0568. Given the ECB have already communicated their desire to add to what are already very easy monetary conditions and now the Fed is done at one, the downside for EURUSD becomes very vulnerable, so keep an eye on it.

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David Hannigan
Author

A graduate of the Cass Business School, Dave's career began with Credit Suisse as an Equity Options Trader on the London Stock Exchange, before moving into the world of FX with Chemical Bank and Citibank. 1994 saw him join National Australia Bank, first as a Senior Dealer, then Senior Vice President and Chief Dealer.

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