The FOMC left the bulls in tatters today, as it came out dovish on the basis that global growth was at risk with the current slowdown in the markets. This sent markets into a spin across the board and this can be seen in all major USD pairs as they bounced back sharply as a result. The market also backed down from a possible rate hike in June as the dovish nature of Yellens comments have pushed back bets that we could see an increase, and we could now be looking at a possible rate hike in August. On top of this inflation forecasts have also been slashed from a previous 1.6% to 1.2% and this will have a major impact on the USD in the future and expectations from the FED when it comes to monetary policy in the future.
The only positive when it came to the US markets was the S&P 500 which rallied of the back of the dovish news. Now this should come as no surprise as the equity markets have enjoyed the dovish nature of the FED and will likely continue to do so in the short term. Despite this resistance has been tough to crack for the S&P 500 and it is currently holed up at 2016 and not looking likely to budge unless we see some positive global economic news or US domestic news about consumer spending.
Kiwi bulls were given a surprise gift today after a weaker FOMC but also as NZ GDP data defied expectations and increased to 2.3% y/y (exp 2.1% y/y) this was led in part by the strong growth in the previous quarter as it lifted to 0.9% q/q (exp 0.7% q/q). Australian data due out shortly will also have an impact on the high flying kiwi dollar, and if we see positive employment data expect further jumps in the value of the NZDUSD as there is a positive correlation between the AUD and the NZD when it comes to large market news.
Despite the jump on the charts from the NZDUSD it's seems almost unlikely that we will see further higher highs unless Aussie data is positive, at present the downward trend has still continued as the wick from today's earlier high has so far been smaller than the previous high and it has helped form a bearish trend line in the market. Also strong resistance at 0.6784 was a major catalyst preventing any further rises on the chart. The next level of support markets will aim for is 0.6630 and it's likely we will see bears in the market look to target this key level, as the NZ economy despite the recent GDP boost looks weaker than ever and the RBNZ will look to target currency markets via jaw boning.
Oil (WTI) markets were also an interesting one to watch today, as oil inventories showed a minor surplus of 1.32M which was below expectations of 3.31M, this coupled with a weak USD had sent oil surging on the charts. Resistance has been very tight at 38.71 and it's likely we could see a strong retest at this level or a pullback, but for the most part it will be primarily technical plays in the coming days.
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