FED Hawkish but USD falls on Draghi Day

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HotForex Market Review
HotForex Market Review

EURUSD, H1

The Greenback has given up all its gains from the initial reaction to the FED rate hike announcement. USA interest rates now sit at 1.75-2.00 per cent following the 0.25 basis point rise. In Switzerland they sit at -0.75. The policy statement and outlook were also more hawkish than the market was expecting. So it looks like it’s four times for the FED in 2018.

The central bank is seeing inflation up and over shooting, growth better than they thought, and unemployment to fall further with a tick up in earnings. A hawkish tone indeed. The Greenback immediately accrued (EURUSD touched 1.1726)  but then gave up all its gains as the details were digested. The key triggers for the dollar decline were that only one FED member had switched from expectations for one more to two more rate hikes this year. In March seven members were expecting two rate hikes and eight were expecting one more, yesterday the split was only eight for two and seven for one.  This and the China trade tariff worries (tomorrow June 15 is the deadline for the tariffs to potentially come into force) pulled the Greenback, US Treasury Yields (which had gone back over over 3%) and Equities all down.

The Crossing EMA H1 strategy suggested strength from the 11:00 candle yesterday (1) and has closed north of the Bollinger Band mid line (20 period moving average) ever since. So a trend following strategy (which avoided the FED announcement) triggered twice yesterday and safe entries were also provided this morning as we remained north of the three key moving averages, (which also still remain nicely aligned). The RSI has also been trending up from 48.42 at 11:00 yesterday to 68.28 currently without ever getting into the overbought zone. The rally has currently stalled at the first major resistance, R1 (1.1818), the upper Bollinger band is 1.1825 and R2 is at 1.1847.  The EUR awaits the ECB decision, policy statement and Mr Draghi’s press conference.

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Stuart Cowell

Senior Market Analyst

HotForex

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