Fed’s Williams Rocks the Markets

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USD Recovers Off Lows

The US dollar is doing its best to recover today following a sharp drop lower, posted yesterday, in response to dovish comments from Fed’s Williams. Williams outlined the need for urgent action from the Fed saying it should not keep its “powder dry” and instead, should act as quickly as possible. Williams’ comments have boosted market pricing for a more aggressive cut at the July meeting, sending USD lower. The index trades 96.57 last, having recovered somewhat off yesterday’s 96.32 lows.

Euro Weighed On

EURUSD has come off a little today, weighed on by the recovery in USD. The market has been struggling to build a directional view in EURUSD, with price caught between expectations for both Fed and ECB easing. If the Fed does opt for a larger rate cut, this could provide support for EURUSD which is currently sitting at 1.1253, up off the 1.127 level support.

Pound Down Again

GBPUSD has been under pressure again today also. After posting a strong rally yesterday in the face of USD weakness, which saw price bouncing off the bottom of the bearish channel, price has rolled over again. 1.2604 remains the key local resistance level to watch, with 1.2437 providing support.

SPX500 Back Above 3000

Risk assets have also been well supported on the back of Fed’s Williams’ comments. SPX500 broke back above the 3000.59 level in reaction to the comments and is managing to hold on above the level so far today. Equities are likely to remain supported heading into the FOMC meeting at the top of the month.

JPY & Gold Down

Safe havens have been lower today, weighed on by both the recovery in USD and higher equities prices. Surging asset prices, in light of expected Fed easing, have seen diminished safe haven flows in JPY recently. USDJPY trades 107.67 last, having recovered off yesterday’s 107.21 lows.

XAUUSD broke out to fresh multi-year highs yesterday in response to William’s comments before retracing some of its gains in response to a stronger US dollar today. XAUUSD trades 1440.22 last, with price moving back down towards the 1433.48 level.

Crude Rallies Off Lows

Oil prices have seen some recovery over recent session also, in the wake of a sharply lower USD. However, oil still trades lower on the week which will be frustrating for bulls in light of the EIA reporting a fifth consecutive weekly drawdown in USD crude stores last week. For now, it seems that concerns around the demand outlook over the medium term are weighing on crude which trades 56.07 last, capped for now by the 56.18 level broken yesterday.

Commodity Currencies Capped

USDCAD has traded higher today also with price breaking back above the 1.3037 level which was broken yesterday. USDCAD has been hovering around the 1.3037 level over the last few weeks and risks are building to the downside. The only element keeping USDCAD afloat currently is the weakness in oil prices which remain pressured today.

AUDUSD finally pierced above the bearish trend line yesterday, running from 2019 highs, as USD weakness catapulted AUD higher. While the break was short-lived, AUDUSD remains above the broken .7048 resistance, for now, keeping focus on further upside in the near term.

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