Forex Update: Markets in Turmoil After Fed-Shocker

Forex Market Snapshot

Asset Current Value Daily Change
EUR/USD 1.1453 0.68%
GBP/USD 1.2679 0.55%
USD/JPY 111.69 -0.69%
AUD/USD 0.7135 0.40%
GOLD 1,260 1.07%
WTI Crude Oil 46.62 -1.21%
BTC/USD 3,984 8.14%

Forex markets and traditional financial markets in general are trading in a very volatile fashion since yesterday’s Fed-decision and the following press conference, as the much more hawkish than expected stance of the Central Bank caused wild swings across asset classes.

The Dollar spiked higher as an initial reaction, but today, the Greenback is significantly lower, with the bond market not buying the rate hike forecasts of the Fed and Jerome Powell. The Fed Chair also told the press that the Fed is satisfied with its quantitative tightening efforts, and that lack of flexibility drove a sharp drop in stocks and risk-on currencies in late trading.

US Treasury yields barely budged on the hawkish surprise, and long-dated yields actually fell to fresh multi month lows, with traders betting on a major Fed policy error and a subsequent hard landing in the economy.

The USD is down across the board today, and as the Bank of Japan also delivered a more hawkish than expected message, the Yen is among the strongest majors, while equities and risk-on commodities are under pressure today as well.

Technical Analysis

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair surged higher today after the initial post-Fed drop and the Euro topped the 1.1440 level, hand hit a new 6-week high against the Dollar. British Retail Sales came in much higher than the consensus estimate and that lifted both the Pound and the Euro ahead of the Bank of England’s monetary meeting.

Today’s move could finally open up the way for a larger scale correction in the ongoing long-term downtrend in the most-traded pair, but we still treat the rally as a shorting opportunity, with the 1.16 level being an ideal target for the move.

Nasdaq 100, 4-Hour Chart Analysis

Taking a peak a the key stock markets, the Nasdaq joined the global bearish shift in earnest yesterday plunging below its February low and hitting its lowest level since mid-2017. With now all of the major markets being in a technical bear market, our “sell-the-rallies” approach continues to be valid, and bulls should remain defensive towards equities, especially in the US where valuations are still sky high.

USD/JPY, 4-Hour Chart Analysis

The USD/JPY pair continued the bearish move following the central bank meetings, with the risk-off sentiment and the slightly hawkish BOJ surprise pushing the Yen higher. The pair is now very close the October low near 111.50, and a move towards 110 seems likely, as the BOJ didn’t use the recent dip iin global yields to move to a more dovish stance.  Strong resistance is ahead near 112 and 112.50, and traders should sell the rallies in the pair.

WTI Crude Oil, 4-Hour Chart Analysis

WTI crude oil is still under heavy selling pressure following the Fed decision, with the contract trying to form a bottom near the $46.60-$47 support zone. Given the weakness across risk assets, a spike below $45 is still in the cards, with the broad declining trend clearly being intact. That said, traders could enter speculative long positions here with strict risk management, as a counter-trend move is possible in the illiquid holiday season, with targets ahead near $50 and in the $53.50-$54.50 area.

Key Economic Events Tomorrow

ChartBook

Forex

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

EUR/JPY, 4-Hour Chart Analysis

AUD/JPY, 4-Hour Chart Analysis

GBP/JPY, 4-Hour Chart Analysis

USD/CHF, 4-Hour Chart Analysis

USD/CNH, 4-Hour Chart Analysis

Commodities

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

Featured image from Shutterstock

Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.