FOMC statement: FED hawks inspires USD bulls

Global Markets

Dollars bulls were instilled with inspiration as a hawkish FOMC statement renewed the possibility of a US rate hike in 2015. A striking change to the statement was the removal of a line that discussed how global developments may threaten growth in the US. With the Fed’s focus shifted away from global developments such as China’s deceleration and falling commodity prices, the pressure is back on US economic data as the trigger for when the Fed will move forward with a rate rise. According to the Central bank, despite the consecutive soft NFP announcements from September, the US economy has expanded at a moderate pace. This strong hawkish bias has offered a lifeline to the vulnerable Dollar, and with most investors swayed on the possibility of a US rate hike in 2015, the USD may keep appreciating until the next FOMC statement in December.

As a result of the statement’s hawkish bark, the Dollar Index cleared 10 week highs. With sentiment for the Dollar experiencing a sharp change in polarity, market participants may continue to bet on the possibility of a December hike which in turn should result in the Dollar Index appreciating to the next relevant resistance at 100.00.

Dollar strength has caused the EURUSD to decline below the 1.100 psychological support; a scenario most desirable for the ECB. Although the dovish Mario Draghi has threatened further QE if needed, a strong Dollar may encourage an environment that will benefit European exporters; the first steps to reinvigorating economic growth within the Eurozone. I have always felt that the ECB was operating in standby mode with the catalyst to move forward being none other than the Fed. There may be a scenario where the ECB observes the actions of the Fed in December, before then acting in 2016.

Despite the change of events, questions may be raised on how much more bark the Federal Reserve can give before investors impatiently await the bite that is a rate hike. If the Fed fails to move forward with a US rate hike in 2015, this will not only have a damaging impact on its already bruised credibility but may also result in an unprecedented selloff in the Dollar.

EURNZD

The EURNZD is technically bearish on the daily timeframe. Prices are trading below the daily 20 SMA and the MACD has crossed to the downside. As long as prices can keep below the 1.6950 resistance, there may be a decline to the next relevant support at 1.6000.

CADCHF

The CADCHF is technically bullish on the daily timeframe. Prices are trading above the daily 20 SMA and the MACD has crossed to the upside. A breakout above the 0.7565 resistance may open a path to the next relevant resistance at 0.7650.

NZDJPY

The NZDJPY remains technically bullish on the daily timeframe as long as prices can keep above the 80.00 support. The candlesticks are above the daily 20 SMA and the MACD has crossed to the upside. A breakout above the 83.00 resistance may open a path to the next relevant resistance at 84.50.

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