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FOMC Lifts USD As Fed Looks Through Soft Data, NFP Set To Drive USD

5/4/2017, 10:40:51 AMBasics of Trading
FOMC Lifts USD As Fed Looks Through Soft Data, NFP Set To Drive USD

Talking Points:

US economic slowdown seen as transitory by FOMC, USD supported

JPY bears losing ground as USD/JPY trades at 61.8% of March-April range

Metals sell-off continues as silver sees 12th straight down day, worst slump since 2001

On Wednesday afternoon, the USD firmed up after the FOMC decision that informed markets that the Fed is looking through the soft data and seeing it as “transitory.” Second, the Fed noted in the statement where rates remained unchanged that they still expect to move forward later in the year with reinvesting the balance sheet, which is synonymous with shrinking their balance sheet, which ballooned through multiple QE attempts. USD strength was best seen vs. the Japanese Yen and other higher yielding currencies like the AUD, which fell 1.5%.

JPY weakness remains a theme worth watching as Japan provides no liquidity due to the Golden Week holiday that has markets closed. USD/JPY is catching the eye of technical traders as the daily chart shows a price move above the Daily Ichimoku Cloud as well the 61.8% retracement of the March-April range. USD/JPY is positively correlated with higher US Yields, which was the FOMC result of the rates market after the Fed statement kept the probability of a June rate hike high.

Lastly, the commodities sell-off continues as evidenced most clearly through silver and gold. Silver worked on its 12th day lower. The 12 down days makes this current bear run in silver the worst since 2001. Similarly, Crude Oil and Copper were sold on the day. Crude Oil traded near a six-week low as US production is at the highest levels since August 2015 and similarly high copper inventories saw copper drop by over 3.5% intraday.