Currency Market Trend Analysis: September 21, 2017
Headlines
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FOMC leaves rates unchanged, announces balance sheet reduction (as expected), dot plot now more aggressive, forecasting one more rate hike in 2017 and three in 2018 (more hawkish than expected). Janet Yellen didn’t seem overly concerned about recent softness in inflation and the Hurricanes.
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USD knee-jerks lower initially (tests key levels), then roars higher as shorts run for cover. Market was positioned for a dovish announcement. Gold, silver, JPY, treasuries all weaker. US stocks largely un-phased. Fed fund futures now pricing in a 66% chance of a 25bp rate hike on December 13.
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JPY extends Fed gains overnight as BOJ leaves monetary policy unchanged (as expected) and the tone is dovish yet again (inflation still not on target, BOJ to stimulate more if needed).
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AUD extends losses on dovish comments from the RBA’s Lowe in a prepared speech. While he acknowledged rates rising globally, says there is no rush for Australia.
Currency Calendar
| Date | Releases / Holiday | Entity |
|---|---|---|
| September 21, 2017 | ECB President Draghi’s speech | EMU |
| September 21, 2017 | BOJ Monetary Policy Statement | JPY |
| September 21, 2017 | BOJ Interest Rate Decision | JPY |
| September 21, 2017 | RBA's Governor Philip Lowe Speech | AUD |
Upcoming bank holidays and impactful report releases for select countries.
By The Numbers: Daily FX Snapshot
USD/CAD - Canadian Dollar
Market bounced off the support levels we mentioned yesterday and then blew through the 1.2340 resistance level. The high for the move was 1.2390 and we’ve backed off from there overnight. Yesterday’s reversal is bullish technically on the charts, but the market needs to hold the 1.23s and move higher sooner rather than later. Longer term, market is still bearish on the weeklies so long as we stay below 1.2500 and the US/Canada interest rate differentials, while taking a little hit today, are still supportive to CAD. CAD futures traders liquidated over 1300 contracts on the move yesterday.
EUR/USD - European Central Bank Euro
The Euro is doing a great job of shaking traders out of their positions for the second week in a row. After four days of trickling higher on dovish Fed expectations and positive technicals (market regaining 1.20 yesterday), the market puked lower post FOMC, almost engulfed the prior day’s candle and broke the 1.19 handle. Technically we’re now looking at a miniature head & shoulders pattern on the daily as well (which is bearish). Market needs to decide what it wants to do quickly as we now have momentum to test the 1.17s. Euro futures traders added around 900 contracts in yesterday’s action. Hearing talk on the wires now of a large 1.1950 option expiry today at the NY cut (might act as a magnet until 10am).
GBP/CAD - British Pound
Sterling was probably the biggest loser post FOMC. In the kneejerk reaction to the headlines, the GBP failed for a fourth time is as many days to trade decisively above 1.3600. This is a bearish development. The market is now staring at the 1.3450-60 support level. Not much in the way of support beneath there. GBP crosses are looking a little tired too.
AUD/USD - Australian Dollar
The Aussie has gotten destroyed in the last 18hrs as a hawkish Fed combined with a dovish RBA has got many traders completely re-thinking their positions going into week’s end. Market touched the 81 handle for a brief moment during the kneejerk reaction yesterday and his since been a downhill ski slope. Support at 0.7990 and 0.7950 has given way. Next support 0.7920, then 0.7860s. NZD not lending any support today.
USD/JPY - Japanese Yen
The Yen continues to enjoy its post FOMC rally as the BOJ’s Kuroda was dovish as usual in his remarks overnight. Market has broken above the 112.20 resistance level. Weak precious metals and treasuries continue to support, but the market saw selling pretty decisively above 112.60 in early European trading. Yen futures traded added almost 4k contracts yesterday.
Market Analysis Charts
USD/CAD Chart
EUR/USD Chart
AUD/USD Chart
Charts: TWS Workstation
About the Author
Erik Bregar - Trader
Erik works with corporations and institutions to help them better navigate the currency markets. His desk provides fast, transparent, and low cost trade execution; up to the minute fundamental and technical market analysis; custom strategy development; and post-trade services -- all in an effort to add value to your firm’s bottom line. Erik has been trading currencies professionally and independently for more than 12 years. Prior to leading the trading desk at EBC, Erik was in charge of managing the foreign exchange risk for one of Canada’s largest independent broker-dealers.
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Exchange Bank of Canada (EBC) is a Schedule 1 bank based in Toronto, Canada. EBC specializes in foreign exchange services and international payments providing a wide range of services to financial institutions and corporations, including banknote foreign currency exchange, travelers' cheques, foreign currency cheque clearing, foreign currency bank drafts, Global EFT and international wire transfers through the use of EBC's innovative EBCFX web-based FX software www.ebcfx.com.
