The dollar has opened in London about 1% higher following the Fed’s announcement yesterday, which confirmed the start of a QT program, as had been widely anticipated, but showed via the dot plot that another rate hike is in the works before year-end followed by another three hikes in 2018. The BoJ subsequently announced unchanged policy, recommitting to ultra-accommodative policy settings, while a new board member argued that further easing may be necessary. USDJPY logged a four-month high at 112.64, well up from levels near 111.30 seen before the Fed’s announcement, and subsequently settled around 112.50. EURUSD dove from around 1.2010 to a one-week low of 1.1861 before steadying. The narrow traded-weighted USD index clocked a one-week high of 92.49. The gains were concomitant with higher Treasury yields as markets re-price Fed policy expectations.
However, it is too early to judge if the USD bears have been squeezed completely, the Fed statement was more hawkish than expected and continues the post Jackson Hole (September 25) pattern, initiated by the BOC, taken up by the BOE and now move on again by the FOMC. Draghi’s speeches today and tomorrow awaited with added zest. I remain short EURUSD on the Daily chart from September 14 to 1.1823. The H1 chart has moved sideways during the Asian session and is looking to regain 1.1900 with support at 1.1860.
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Senior Market Analyst
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