US dollar eases post-FOMC

Pound tumbles after BoE’s non-move

The Bank of England’s surprise call not to hike rates overnight sparked some volatility in currency markets as it led to a sharp retreat in yields across the US and Europe. Somewhat surprisingly, the US dollar outperformed, with the dollar index rising 0.51% to 94.33, where it remains in Asia. Given the moves in bond yields and gold overnight, the rise of the US dollar is perhaps a signal that rallies elsewhere will be temporary.

 

EUR/USD fell 0.50% to 1.1550 overnight, and support at 1.1520 looms. Failure signals more losses to 1.1400. Resistance is well-marked at 1.1615 and 1.1700. Sterling collapsed 1.30% to 1.3500 overnight post the BOE policy decision, and the street had clearly gone into the meeting long expecting a rate hike. Below, 1.3400 looms as sterling’s next significant support, and its fate will likely be decided by the tone of the BOE speakers this afternoon.

 

USD/JPY has fallen to 113.65 as US yields moved lower overnight. It remains a slave to the US/Japan rate differential and looks to set to continue ranging into the Non-Farm Payrolls. USD/JPY has support at 113.40, while a rise through 114.70 signals more gains above 115.00.

 

AUD/USD and NZD/USD both retreated overnight as the US dollar staged an impressive rally. AUD/USD is 0.65% lower at 0.7393 as of this morning and is testing its 100-day moving average at these levels, thanks, in part, to the dovish fence-sitting of the RBA. NZD/USD has slumped by 0.80% to 0.7090 as of this morning. A close below 0.7100 this evening signals a retest of 0.7000.

 

Asian currencies retreated modestly overnight before firming slightly today. Asian markets are marking time into tonight’s US non-Farm Payrolls. The strong US dollar rally in the DM space overnight is a clear warning, though, that a blowout payroll number to the topside and a consequent rise in US yields could see another wave of selling in Asian FX next week.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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