FOMC calls weak growth a blip

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