Morning Forex Report: USD Catches Late Bid Post FOMC Flop

Market Commentary  

Despite the disappointment from the FOMC meeting, dip buyers of USD emerged during the European session on Friday, undoing all the damage done by Fed’s inaction a day earlier. By the U.S close, the USD index DXY edged back above 95.20 from session lows near 94 handle. Over the weekend, Fed’s Bullard said that FOMC should have raised rates. Fed’s Williams also bought hope that the lack of press conference for the Oct FOMC is not problematic for possible hike.

ECB Coeure commented that monetary policy divergence between US and Europe remains even after Fed did not hike interest rates. Recall that last ECB meeting saw Draghi pledging to do more QE if need arises. This could continue to weigh on any EUR strength. Over the weekend Syriza party won the Greek elections, restoring Alexis Tsipras back to power. Today, ECB’s Nowotny and Praet are scheduled to speak; they look likely to carry the dovish baton from Coeure on Friday.

GBP traders scaled back expectations for the Bank of England to tighten monetary policy after the US Federal Reserve backed away from raising interest rates. A speech by Bank of England chief economist Andy Haldane, warning that the next move may be a cut rather than a rise in rates.

USDJPY tumbled below the 120 -handle to 119.06 (18 Sep) following FOMC decision to keep policy rate unchanged amid a dovish statement and projection, USD stabilised in late trade Friday and is attempting to recapture the 120 handle. With the domestic market out for most of the week, trade will likely be range bound in the early part of the week.

Technical  Commentary 

EURUSD Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish

  • Sharp reversal from 1.1450 resistance, as 1.1250 supports expect retest of 1.1350. Failure at 1.1250 reopens a test of bids at 1.11 next
  • Daily Order Flow bullish; OBV sideways to down, Linear Regression and Psychology pierce midpoints from above
  • Monitoring intraday price and Order Flow indicators on a test of 1.11 or 1.1550

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GBPUSD: Short Term (1-3 Days): Bullish  – Medium Term (1-3 Weeks) Bearish

  • Rejected from initial range resistance test at 1.5650  a topside break targets 1.58. Only a breach of 1.55 would concern near term bullish advance
  • Daily Order Flow bullish; OBV sideways, Linear Regression and Psychology retesting midpoints from below
  • Monitoring intraday price action and Order Flow indicators on a test of 1.55 or 1.58

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USDJPY: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bullish

  • Retest of 119 support attracts buyers but as 121 caps upside reaction expect a test of stops sub 119.
  • Daily Order Flow bearish; OBV sideways, Linear Regression and Psychology pierce midpoints from above
  • Monitoring intraday price action and Order Flow indicators on a test of 119 or 122

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EURJPY: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish

  • Rejcted at range resistance 137 a topside break targets 141. While 137 contains upside expect a rotation back to test 132 bids
  • Daily Order Flow bullish; OBV sideways to down, Linear Regression and Psychology testing midpoints from above
  • Monitoring intraday price action and Order Flow indicators at 138 or 132

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