Thursday, March 20, 2014
For today, the EUR/USD is still extending its move to the downside on dollar strength, after the Fed released their hawkish FOMC statement from Wednesday afternoon. On yesterday, Fed Chair Janet Yellen and the FOMC members altered their guidance and forecast on rates. The market anticipated an adjustment in forward guidance, with the removal of the unemployment threshold of 6.5% and introduction of a more qualitative guidance that involves looking at labor market conditions, in addition to indicators that measure inflation expectations. However, it was a change in the Fed Funds Rate Forecast that really shocked the market, causing a selloff in both equities and fixed income markets. Although the FOMC statement indicated that the Federal Funds Rate will remain low for a "considerable amount of time" after QE ends, Fed Chair Janet Yellen clarified during her press conference that rates can rise as early as 6 months after QE. This statement created nervousness in the market as investors fear that a pre-mature tightening of monetary policy can actually undermine the economic recovery. As a result, US treasury bonds fell, especially on the shorter end of the curve (2yr, 3yr, 5yr notes), which helped to support the dollar bias during yesterday and today's trading session.
During this webinar, we discussed the rally in the greenback across multiple currency crosses, especially in EUR/USD. The common currency continued to tumble for another 96 pips from the intraday high at 1.3845 to intraday support at 1.3749. Weekly Unemployment Claims went up 5,000 to 320K, beating market forecast of 327K. The Philly Fed Mfg. Survey for March came out of negative territory from February's poor reading (-6.3),and beat forecasts by reporting 9.0. Existing Home Sales for February came in at 4.60M, falling below the expectation of 4.65M, to a 19 month low.
Wednesday, March 19, 2014
Central Bank statements and monetary policy move the markets again after the Federal Reserve released their statement from this week's 2-day FOMC meeting. During today's trading session, the greenback was the true winner as it rallied across multiple asset crosses on the back of a more hawkish Fed. The EUR/USD tumbled for 124 pips from the intra-day high at 1.3934 to support at the intra-day low of 1.3810. The pair is currently in consolidation above this support level, awaiting a breakout during the Asian trading session. We expect to see a continuation of USD strength as Asian & European Bourses open to trade on this news.
In today’s technical analysis video, we describe price action in EUR/USD and identified common areas of support & resistance for trade entry.