It’s noise for all EURO B’s

Psychologically, it’s a disappointment to see the EUR open up virtually unchanged. So far this morning the market has done a good job taking out the weaker shorts just below the April 4 high. Despite the daily charts up-ticking, the market and hourly’s indicate that price levels are stalling in overbought territory. Nothing fundamentally has changed in the past 24-hours. Big-picture politics even remains the same. However, the intraday techies seem to be favoring buying dips with tight stops. Knocking out these looping or loopy orders, depending on what type of ‘B’ your are, a bull or bear, usually is easy fodder for dealers. For now, all we are hearing is ‘noise’ within a contained trading range.

Ben did his darnedest yesterday to curb any ‘irrational exuberance’ about the US economy. As was obvious, the FOMC reaffirmed its conditional commitment to near-zero overnight rates through at least late 2014. Like a good Cbanker should do in his situation, Ben played down the more hawkish elements of the statement and interest rate expectations. Individuals looking for a break below 1.30 EUR and above 85 Yen still have work to do. Some individuals will be looking for a BoJ helping hand this evening.

In its statement, the FOMC held to the very same policy announcement it issued in March, continuing the existing term extension and rollover into mortgage backed and agency debt, with nothing specific about whether it will extend the “twist” operation when completed, other  than the usual pledge to keep reviewing its security holdings. The release of economic projections revealed a slight drift forward in the timing of committee expectations for rate hikes, with two more members calling for a 2014 tightening. However, the number of members looking for a hike sooner remained unchanged at six.

Despite some officials moving forward the appropriate timing of the first rate hike, risks and uncertainties to the downside and the 9-1 vote (Lacker’s usual dissent), points to another “strong policy consensus.” Upgraded assessments of growth and unemployment for 2012 did not extend to the “full forecast horizon.” Ben hinted that the threat to financial stability from Europe’s crisis and the risk of a domestic fiscal policy mistake “may have prompted slight downward revisions to growth forecasts beyond this year.” That said, projections see the pace of recovery gradually improving to an above-trend pace.

The market is unlikely to rebuild a Fed policy tightening bias without US data finding some stronger traction. Without this, the dollar cannot depend on a yield-drive play medium term. Investors will have to rely on an ECB and BoJ easing bias policy to support the “buck.”

On the wires, it’s expected that the BoJ is likely to ease monetary policy tonight by increasing asset buying by between +5 and +10t Yen to the existing +65t Yen program. Currently, Yen outright is trading as if the BoJ is going to fail to deliver. It seems that the currency pair is hell bent on printing the 50% retracement of the 76.03-84.19 up-leg (Ichimoku cloud base). This move will clean out most order books and should allow the BoJ to get a “bang for its buck” when they do ease!

Other Links:
FOMC Statement comparison