The FOMC has spoken, and to no ones surprise it has not raised interest rates at all for this month; opting to continue to hold them at the current 1.75%. The market has certainly been expecting this, and the odds are still very high that the FED will act in the month of June to boost rates as employment continues to expand and the FED expects the US economy to further expand on the back of recent tax changes. The only thing that could potentially change things at present is of course inflation, with the FED still looking to hit that 2% mark as part of its policy. If we saw a jump in inflation then of course this could quicken the pace for interest rate rises, but in recent times it has been sluggish, and a little hard to predict, so it will be hard to really guess where it’s going from here.
As a result of the comments the reactions so far have caused some dollar weakness in the market, as traders were looking for something a little more hawkish. For the most part though major pairs have not seen any major moves and are still positive for trend opportunities. Case and point the USDJPY which has been in a bullish trend for some time now as it glides up the chart with a potential target of 111.083. Support at 109.347 is also looking quite strong with the potential for any bearish pressure to find it tough going around there. The trend is strong, and US fundamental data continues to be strong, putting the USDJPY is a strong position to continue its gains. Also note there is a potential short term bullish trend line, however it’s quite steep and short so it would only be able to hand light pressure from the current market volatility.
The GBPUSD continues to be a trade not to be taken lightly with all the recent debate around Brexit and of course a resurgent USD. There are still some thorny unpopular issues surrounding the UK government with no clear impasse based on the EU’s comments. However, there was briefly progress and the markets were enjoying it for some time as could be seen by the bullish movements. The USD though has turned that bullish sentiment on its head and is now dominating the GBPUSD as a result.
Looking at the GBPUSD and the technical’s we can see that it has clearly cracked through that bullish trend line with a vengeance and is drifting lower under bearish pressure. Right now it’s testing support around 1.3575 with the potential to go lower to the next level at 1.3314. In the event that the GBP does manage to get some bulls finding interest I would look to the long term trend line as dynamic resistance before contemplating 1.3801 as the next level of resistance in this instance. Long term trend lines are well known for rejecting wave movements, rather than trending. All in all, the GBPUSD has turned and is looking like a very interesting trade at present with the potential to go lower.