Inflation overshoot was the key takeaway from the FOMC press conference yesterday. Powell reiterated the Fed’s stance that they will let the inflation develop before they consider taking action (raising rates). The Fed needs to see actual, not forecasted progress was the main message in yesterday’s FOMC press conference. There was more optimism too. Fed’s view on economic growth and the labour market was positive and they raised the outlook for both. We reported yesterday how inflation expectations and bond yields were rising and now that the Fed sticks to the inflation overshoot idea it is likely that we will see the bond yields rising even higher.  By reading further you agree with our disclaimer at the bottom of this page and acknowledge that we do not provide investment advice.

Despite the yields rising yesterday, the dollar was weak against the main rivals. EUR, GBP, AUD and NZD created higher swing lows suggesting further upside in due course but now at the time of writing these pairs have reacted lower for resistance levels. CAD and CHF also gained ground against the greenback. Gold and silver reacted positively also, but crude oil just moved sideways.

USDJPY is still trying to move higher while the price of gold is trading relatively close to 1764 key resistance level while crude bounced from 63.70 in yesterday’s trading and is now right above the level. Lower swing high suggests the support could get broken soon. In US stock markets it was again the value stocks that were leading the rally but Nasdaq looks like it is about to follow the lead. Today’s key risk event is the BOE rate decision. For more details on macroeconomic releases see our economic calendar

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Apart from the good employment numbers released today (88.7K, 30.5K expected), it is the growth expectations in Asia and the dollar diluting actions in the US that are driving the AUDUSD higher. The pair tried to challenge the 0.7837 resistance earlier today but it was too much and there was a small correction lower. A decisive break above this resistance is likely to allow the pair to extend the rally to levels near the upper end of the bullish price channel. If the rally fails the next major support is at 0.7700. The other significant support and resistance levels are at 0.7563, 0.7621 and 0.8006.

After the higher low put in place the day before yesterday GBPUSD is in a process of creating a bullish triangle (red lines). A breakout from the triangle would indicate a 70 – 150 pip move. The lower end of the triangle is currently at 1.3813. This is where we also have the 38.2% Fibonacci retracement and the 50-period SMA which make the level highly significant. A failure to stay above the level would indicate a move to 50% Fibonacci level at 1.3688. Open a VIP Black account with us. There are no per trade execution or monthly fees on our VIP Black accounts.

USDJPY has been trading higher since February 10th and is now some 450 pip higher than the starting point. We alerted our traders to this level and what a wonderful move it has been! The pair is now trading near the recent highs of 109.35 and is now far away from levels where the pair could have been said to represent value. Therefore the question is how do we know if this market can still keep on moving higher? The answer is we don’t but we can monitor price action near supports on retracements. Evidently, there was buying at 108.70. This was also a higher low which is positive. As long as the pair keeps on making higher lows it is likely to move beyond the resistance levels. Therefore, USDJPY is currently in an uptrend but let’s keep an eye on the price action at key price levels (108.33, 108.70 and 109.36).

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Recent macroeconomic data releases

  • US Core Retail Sales -2.7%, 0.2% expected
  • US Retail Sales -3.0%, -0.5% expected
  • Canadian CPI 0.5%, 0.7% expected
  • US Crude Oil Inventories 2.4M, 2.8M expected
  • Federal Funds Rate <0.25% , <0.25% expected
  • FOMC Press Conference
  • New Zealand GDP -1.0%, 0.2% expected

Important macroeconomic data releases today

  • Australian Employment Change 88.7K, 30.5K expected
  • Australian Unemployment Rate 5.8%, 6.3% expected
  • ECB President Lagarde Speaks
  • BOE Official Bank Rate 0.10% expected
  • BOE Monetary Policy Summary
  • Canadian ADP Non-Farm Employment Change -231.2K previous
  • US Philly Fed Manufacturing Index 22.5 expected

You may access the times and dates in the economic calendar here.

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Janne Muta
Chief Market Analyst

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All the prices in this report are CFD prices based on price charts provided by TIOmarkets unless otherwise stated.

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Janne Muta

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