FOMC, US Dollar Talking Points:
- The FOMC did not announce a formal start to taper at today’s rate decision, but they did note a possible rate hike next year.
- While the initial excitement of the statement and the summary of economic projections appeared well-received by risk markets, matters turned around during the presser with the US Dollar shooting up to a fresh September high with stock prices turning-lower.
- The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
The September FOMC rate decision brought no formal announcement on asset purchase taper, which would normally be perceived as a very bullish signal with the FOMC keeping accommodation at a full throttle pace.
But that wasn’t all that was involved, however, as the Fed also upgraded their forecast for rate hikes, with half of the voting members at the bank seeing a rate hike in 2022. This would be a hawkish twist to the Fed’s approach but, so far, it appears that markets are shrugging off that latter fact in favor of the former.
Initially, this appeared to be received well by risk markets: The US Dollar dropped down to a weekly low as stock prices pushed higher. But, a turn-around began to show during the press conference with USD bulls making a re-appearance and driving the currency back up towards the September high.
At this point, stocks are higher although prices have pulled back from the initial run after the release of the statement. Comments during the press conference did not appear to help the cause of bulls, with prices in the S&P pulling back to support at the 4383 level that had held the lows ahead of the announcement.
S&P 500 Hourly Price Chart
After an initial move lower that pushed USD down to a fresh weekly low, the Greenback reversed, with aggression, to push right back up towards resistance. The September high is now very nearby, at 93.43, after which the 2021 high comes into view at 93.73.
US Dollar Hourly Price Chart
I had looked at EUR/USD yesterday. The pair had grinded down into a really big support zone earlier this week, the same zone that helped to catch the Q1 swing low back in March. This zone runs between a couple of Fibonacci levels at 1.1709 and 1.1736.
The initial move of USD weakness popped EUR/UDS up to resistance at 1.1750; after which sellers came in and re-grabbed control, with prices now pushing down to a fresh September low.
EUR/USD Hourly Price Chart
— Written by James Stanley, Senior Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX