Fed Pauses, Stays Cautious; Stocks Slip, Yields Ease

Euro Slides, Sterling Climbs, DXY Climbs, AUD Dips

Summary:

The Euro (EUR/USD) retreated to 1.0910 (1.0945) after the Fed held interest rates at 22-year highs. FOMC meeting minutes revealed that policymakers favored a cautious approach to raising interest rates ahead.

Sterling (GBP/USD) climbed to 1.2535 from 1.2465 after hawkish remarks from Bank of England officials. BOE Governor Bailey said that while inflation was on track, risks were tilted to the upside. The EUR/GBP cross rate tumbled to 0.8705 from 0.8755, down 0.53% following Bailey’s statement.

The Dollar Index (DXY), which measures the value of the Greenback against a basket of 6 major currencies, climbed to 103.55 after tumbling to an overnight and near 2-month low at 103.17.

Against the Japanese Yen, the Greenback (USD/JPY) rebounded to 148.40 from 147.15 overnight and September lows. Japan’s 10-year JGB yield fell 6 basis points to 0.69%. The benchmark US 10-year treasury bond yield dipped to 4.42% from 4.44%.

The Australian Dollar (AUD/USD) dipped to 0.6555 after soaring to 0.6590 highs after RBA Governor Michelle Bullock stated that inflation is a challenge. The Kiwi (NZD/USD) rallied to 0.6049 (0.5998).

Emerging Market currencies finished mixed. The USD/CNH (Dollar-Offshore Chinese Yuan) slid to 7.1450 from 7.2150 earlier in the week. China kept its Loan Prime Rates unchanged at 3.45% for 1-year and 4.2% for 5-years.

Against the Thai Baht, the Greenback (USD/THB) rallied to 35.15 from 35.00. The USD/SGD (Dollar-Singapore Dollar) pair settled lower, at 1.3385 from 1.3415 earlier this week.

Economic data released saw US September Existing Home Sales (m/m) fall to 3.7 million units from 3.96 million previously, and lower than expectations at 3.9 million. On an annual basis, in September US Home Sales fell to -4.1% from -2.2% from the previous month.

Wall Street stocks eased modestly ahead of tomorrow’s US Thanksgiving holiday, which is huge in North America. Many market participants in America will be off until next week.

EUR/USD – The shared currency slid to 1.0910 from 1.0950 in late New York trade. The Euro retreated against the overall stronger US Dollar after the Federal Reserve kept interest rates at 22-year highs. Germany’s 10-year Bund yield dipped to 2.56% from 2.58%. Overnight, the Euro traded to 1.0965, highs not seen in nearly two months.USD/JPY – Against the Japanese Yen, the Greenback rebounded to 148.40 from 147.15 overnight lows in choppy trade. The USD/JPY pair broke down through the 150 level Friday following softer than expected US inflation and production data. The high traded was 148.60.AUD/USD – The Aussie Battler dipped to 0.6555 at the New York close, off its overnight high at 0.6590 following hawkish comments from RBA Governor Bullock. The overnight low traded for the Aussie Dollar was at 0.6544. The Aussie was mostly stronger against other FX.GBP/USD – Sterling rallied against the trend to 1.2535 from 1.2465 on hawkish remarks from Bank of England Governor Bailey and other officials. Overnight high traded for the British Pound was 1.2559 while the low was at 1.2504. Sterling’s strength was broad based.On the Lookout:

Today’s economic calendar is light and kicks off with Australia’s Westpac Bank October Leading Index (m/m f/c 0.1% from 0.07% - ACY Finlogix).

RBA Governor Michelle Bullock is scheduled to speak again. Italy starts off European data with its September Construction Output (y/y f/c -0.8% from -0.3% - ACY Finlogix), and Eurozone Flash November Consumer Confidence Index (f/c -17.6 from -17.9 – ACY Finlogix).

The UK follows next with its November CBI Industrial Trends Orders (f/c -25 from -26 – ACY Finlogix).

Early tomorrow morning the US releases its Weekly Unemployment Claims (f/c 226k from 231k – FX Street), US October Durable Goods Orders (f/c -3.1% from 4.6% - ACY Finlogix), US October Durable Goods Orders less Transportation (f/c 0-.1% from 0.5% - ACY Finlogix), US November Michigan Final Consumer Sentiment (f/c 60.5 from 63.8 – ACY Finlogix), and US November University of Michigan Consumer Inflation Expectations (f/c 3.2% from 3.2% - FX Street).

Trading Perspective:

While the Dollar Index (DXY) climbed overall, it’s fortunes against other currencies were mixed. Despite the FOMC minutes suggesting that the US central bank favors a cautious approach toward hiking rates ahead, the Greenback is vulnerable to pullbacks. The strong rally in Sterling is a warning to Dollar bulls.

Against the Emerging Market currencies, the US Dollar was also mixed. Liquidity heading into the US Thanksgiving weekend will dry up which could see more FX volatility ahead. Happy days!

EUR/USD – The shared currency retreated to 1.0910 in late New York trade after trading to an overnight and near 2-month peak at 1.0965. Today, look for immediate support at 1.0900 (overnight low) followed by 1.0870 and 1.0840. On the top, immediate resistance can be found at 1.0935, 1.0965, and 1.1000. Look for another roller coaster ride in this currency pair, likely between 1.0880-1.0980. The preference is to sell rallies but trade the range. (Source: Finlogix.com)

USD/JPY – Against the Japanese Yen, the US Dollar had another volatile session. The Greenback plummeted to an overnight low at 147.15 from 148.60 before steadying to 148.40 in late New York. Late last week, the USD/JPY pair saw a high at 150.77. On the day look for immediate support at 148.00 followed by 147.70 and 147.40. On the topside look for immediate resistance at 148.70, 149.00 and 149.40. Expect another choppy trading day ahead, likely between 147.70 – 148.70. Trade the range, nice and wide.GBP/USD – Sterling rallied against the overall stronger US Dollar to 1.2535 from its opening at 1.2505. Hawkish rhetoric from Bank of England Governor Bailey and other BOE officials boosted the British currency. Their thinking was that while inflation was on track to its 2% goal, risks are tilted to the upside. Immediate resistance today lies at 1.2560 (overnight high traded was 1.2559). The next resistance level is found at 1.2590. Immediate support can be found at 1.2500 followed by 1.2470. Look to trade a likely range today of 1.2475-1.2575.AUD/USD – The Aussie Battler eased modestly to 0.6555, little changed from 0.6565. Hawkish remarks from RBA Governor Michelle Bullock that inflation is a challenge supported the Australian Dollar. On the day look for immediate resistance at 0.6585 (overnight high). The next resistance level is at 0.6605. Immediate support can be found at 0.6525 followed by 0.6500 and 0.6470. Prefer to sell AUD/USD rallies in a likely range today of 0.6510-0.6570.

Happy Wednesday all, have a top trading day ahead.

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