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Forex Trading StrategiesFed rhetoric pushes the USD lower still. EURUSD hits new highs on the year. Next major target may be 1.2600 if the rally holds in the coming days.
The Fed clearly considering a pause soon as the market reduces its bets on any move beyond 5.00%. US CPI up today.
MAJOR HEADLINES â€“ PREVIOUS SESSION
â€¢ US FOMC minutes showed a Fed that is clearly preparing to pause after hiking rates 15 consecutive times
â€¢ US Weekly Consumer Confidence notched higher to -7 from -9.
â€¢ New Zealand Consumer Prices rose 0.7% in Q1 as expected.
â€¢ Australia Westpac Leading Index rose 0.2% in February
â€¢ Japan Leading Economic Index for February was revised up to 90.9% from the original 81.8%, while the Coincident Index was revised down to 50.0% from 55.6%
The USD continued weaker overnight to new lows against the EUR. USDJPY also swooned below 117.00.
THEMES TO WATCH â€“ UPCOMING SESSION
A powerful cocktail of bearish developments for the USD yesterday - first with the low core PPI data and bearish housing starts, but even more importantly later with the speech from the Fed's Yellen, which actually stole the thunder from the FOMC minutes. Yellen expressed concern that the interest rate rises already under the belt could have deleterious effects on the housing market and therefore the US consumer and that inflation was no concern at this point. Seems like this is the first time that a voting member has expressed this degree of worry on the housing front. This is the best sign yet that they are going to pause at 5.00% (the market also reduced its bets on a move to 5.25% at the June meeting from over 50% to 33% yesterday.)
In any case, the first reaction of the market to the idea of the slowing fed was to uncork the champagne and buy stocks and bonds and the riskier currencies (just about anything vaguely associated with Emerging markets) and nipping the safe haven CHF rally in the bud. This is the typical move to risk willingness in these types of situations. The question is whether the market should or will celebrate in this fashion for more than a day or two more - as there are many dark clouds on the horizon - and here I'm thinking of the inevitable confrontation in Iran and the prospect of a slowing US consumer as the higher interest rates and record high oil prices slowly work their "magic". Almost any scenario leads to a weaker USD unless we see a dramatic pick-up in US inflation and positive economic data (the "incoming information" that the Fed so depends on for determining its next steps)Â´.
Today, GBP may be focus as support once again held. 0.6935 is a very interesting area there, as it was thrice tested support on the way down and is now thrice-tested resistance as the pair tries to figure out the next move. Also important for the pound sterling today are the BOE minutes and the inflation data tomorrow.
Note: the support/resistance levels used in the matrixâ€™s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.
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