Session close (Wednesday, March 21): Settled at 1.2411 up 75.5 ticks
Fundamentals: The Federal Reserve raised rates a quarter point as expected this afternoon. However, they continued to project only three hikes this year while many speculated a fourth will be added. Citing a stronger economic outlook in the face of dismal February data, they raised their growth forecast for 2018 and 2019. The Fed did increase next year’s rate-hike projections to three from two. But still, the U.S. dollar got hammered. We have been discussing the impact of perception for months now. Most recently, the perception relative to Fed Chair Powell’s congressional testimony. Here he was more hawkish and assertive than expected. He created a perception that the Fed would be willing to color outside the lines, act dangerously per se, meaning they would add a fourth hike to this year’s projections. Goldman Sachs even put out a note yesterday calling for such. Powell created this perception that led to optimism around the U.S. dollar. In the face of a budding trade war and drama in the White House, this newfound optimism was today’s FOMC meeting and what every dollar bull clung to during the last 30 days. The tough reality though is that the Dollar doesn’t care about any of this, it is simply reminded each FOMC Meeting that the members will never be as hawkish as they were in December 2016. Furthermore, now currencies paired to the dollar such as the Euro and their central bank will now be more hawkish relative to perception going forward. For that reason, today likely reinvigorated the next bear leg in the dollar as the rally that began in 2014 continues to unwind.
Tomorrow is a busy day with data coming from both sides of the pond, one that could truly confirm today’s move. French PMIs are due at 3:00 a.m. Central, German PMIs at 3:30. ECB’s Lautenschlaeger speaks at 3:30 a.m. Central. German Business Expectations data is due at 4:00 am CT. At 4:00 am, the ECB releases its Economic Bulletin and Eurozone PMIs are released. While we are discussing the Dollar much, it will be important to keep an eye on UK Retail Sales at 4:30 am CT and the Bank of England Interest Rate decision at 7:00 a.m. Central. Out of the United States is weekly Jobless Claims at 7:30 am Central and PMIs at 8:45 a.m.
Technicals: This is the third reversal session in a row as the Euro attempts to find footing and build for a new leg higher. After only slightly Neutralizing our Bias yesterday, we are... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
Session close: Settled at .9480, up 28 ticks
Fundamentals: While the Euro only ticked lower for a split second upon the FOMC decision at 1:00 pm CT, the Yen struggled to find direction for a good 45 minutes and still finished within its initial spiking range. Extremely strong technical resistance poses a threat just above, however, the Bank of Japan’s path is much less clear while politics have also hindered a bullish technical breakout. Traders have begun to realize the ECB will make a drastic policy shift, one where they will tighten policy at faster pace and relative to that of the Federal Reserve. Although the Bank of Japan is not quite there yet, we remain unequivocally long-term Bullish the Yen because of this potential. Tonight, National CPI data is due at 6:30 pm CT.
Technicals: The Yen has traded in an extremely constructive manner and continues to build for its potential and likely... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
Aussie dollar (June)
Session close: Settled at .7757, up 72 ticks
Fundamentals: The Aussie posted a monster session on a weaker U.S. dollar as the FOMC raised rates a quarter point. Commodities were also major beneficiary, and this added fuel to the forex driven move. The Aussie has been under immense pressure upon trade war fears. Although they received an exemption from the United States, the fear is more relative to China. It remains to be seen what will be imposed against Australia’s number one trade partner in the coming days and weeks. While today was a very positive development and opens the door for a recovery, Employment Change data is due out of Australia tonight at 7:30 p.m. Central.
Technicals: As we discussed above, today’s sharp reversal is a very positive development, however, the Aussie faces major three-star resistance at... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
Canadian dollar (June)
Session close: Settled at .7752, up 94 ticks
Fundamentals: The Canadian got bailed out of the gutter this week by a brewing breakout in crude oil. In fact, half of today’s session gains came ahead of the Fed as crude regained the $65 per barrel mark. Of course, the sharp fall in the U.S. dollar after the Fed raised rates this afternoon was the also a big catalyst. However, the weak U.S. dollar also lifted commodities in the energies sector; a breakout in crude oil to $70 will be extremely lifting to the Canadian. With potentially a new bear leg in the U.S. dollar, bull leg in crude and Canadian Prime Minister Trudeau’s upbeat attitude on NAFTA this is the time to be betting for the currency to extend gains. There is no data out of Canada tomorrow.
Technicals: We became upbeat on the Canadian as it attempted to bottom this week because of our extremely bullish stance in crude. A trend line from the highs comes in against... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.