FOMC calls weak growth a blip

<p>The euro trend remains in place with EUR/AUD and EUR/JPY breaking through significant resistance levels yesterday at 1.3030 (2012 high) and 123.80 respectively, technically signalling […]</p>

The euro trend remains in place with EUR/AUD and EUR/JPY breaking through significant resistance levels yesterday at 1.3030 (2012 high) and 123.80 respectively, technically signalling longer term targets of 1.4000 and 128.00.

The US GDP data followed the dour consumer confidence number with a shocking reading of -0.1% against expectations of 1.1%. Like the market, the FOMC dismissed the poor reading as a ‘blip’ blaming poor weather conditions ( hurricane Sandy). The rest of the Fed statement was pretty much as expected, keeping stimulus measures amid signs of a weak economy.

The correlations of 2012 are completely gone, with the euro and Australian dollar now moving in completely different directions. GBP seems to be doing its own thing, with EUR/CHF moving in the opposite direction, making the FX market far more interesting at last.

The euro has initially retraced from overnight session highs of 1.3585 following disappointing results from Deutsche Bank and softer German retail sales numbers. Today will be all about the month end rebalancing with the market anticipating USD selling across the G10 space bar JPY, which is driven in part by the strong performance of US assets relative to G10 counterparts in both equities and bonds, which may prompt passive investors with a hedged mandate to increase their FX hedges on US assets. In the case of Japan, however, Japanese bonds and equities outperformed by an overall large margin, leaving the market to expect JPY selling.

On the data front today I expect the US data to take centre stage ahead of the non-farm payrolls tomorrow as we get initial jobless claims, the Chicago PMI reading and personal Income and Spending. German unemployment this morning will also get some attention.

 


EUR/USD

Supports 1.3530-1.3485-1.3390 | Resistance 1.3570-1.3620-1.3750


USD/JPY

Supports 90.60-90.10-89.85 | Resistance 91.40-91.80-92.35


GBP/USD

Supports 1.5760-1.5720-1.5650 | Resistance 1.5830-1.5900-1.5940

 

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.