Dovish Fed pressed down USD

Dovish Fed pressed down USD

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  • The Fed pledged to keep near-zero rates at least through 2023. Besides, the bank left asset purchases unchanged at $120 billion a month. The dovish message pressed down the US dollar. As a result, EUR/USD and GBP/USD surged. 
  • The decision was made despite inflation worries in financial markets. The Fed raised forecasts for economic growth and the labor market: GDP from 4.2% to 6.5% and unemployment to 4.5% this year.
  • Matthews Asia said Fed’s actions are “very bullish for risky assets”. S&P 500 hit a record high on Wednesday and Dow Jones reached the all-time high of 33,000.
  • The Australian dollar surged to the two-week high after the better-than-expected labor data.
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Technical analysis

EUR/USD had a huge swing up after the Fed report but failed to cross the 38.2% Fibonacci retracement of 1.1990. If it manages to do so, the way up to the 50.00% Fibo level of 1.2040 will be open. On the flip side, the move below the intraday low of 1.1955 will drive the pair down to the 50-period moving average of 1.1930.

EURUSDH4.png

GBP/USD has broken through the 38.2% Fibonacci retracement of 1.3950. So, the way up to 1.4000 is open! However, it shouldn’t cross this resistance on the first try as it lies at the 50% Fibo level. Support levels are 1.3950 and 1.3885.

GBPUSDH4.png

USD/CAD has broken through the psychological level of 1.2400, the level unseen since January 2018. Thus, the way down to the next round number of 1.2300 is open now. However, the RSI indicator has almost crossed the 30.0 level, an indication the pair is oversold. Thus, the reverse up may happen soon. Resistance levels are at the recent highs of 1.2735 and 1.2875.

USDCADWeekly.png

AUD/USD has approached the 61.8% Fibo level at 0.7840. If it breaks it, it may jump to the 78.6% FIbo level of 0.7910. Support levels are 0.7785 and at the 50-day moving average of 0.7730.

AUDUSDDaily.png

Follow the Bank of England’s meeting at 14:00 MT and keep an eye on the GBP!

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Key Forex Event: US Inflation Rate
Key Forex Event: US Inflation Rate

The US Inflation Rate (CPI) will be announced on Wednesday, October 13, at 15:30 MT (GMT+3). Traders eagerly await this event as it will impact the USD and thus the vast majority of currency pairs in the Forex market.

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