FOREX NEWS: FED SEES ‘GRADUAL INCREASES’, US DOLLAR RESPONDS POSITIVELY
Forex News: The pair traded above 1.2400 for most of yesterday’s trading session but the US Dollar showed some signs of strength at the time of the FOMC release. The Fed kept the rate unchanged but mentioned that gradual increases will be performed as the economy requests it.
The bias remains bullish as long as price is above the 50 period but it is now clear that the upside momentum is fading. This means that we will probably see a drop through the 50 EMA and closer to the support around 1.2300 – 1.2280. A bounce at the current support (1.2400) would invalidate such a scenario and will make 1.2540 the next destination.
Action slows down a bit today and the US Manufacturing PMI will be the only notable release. Scheduled at 3:00 pm GMT, this survey shows the opinions of purchasing managers about economic and business conditions in the Manufacturing sector. It acts as an indicator of optimism that has a medium impact on the currency; higher numbers than the forecast 58.7 are beneficial for the US Dollar.
Price action was choppy throughout yesterday’s trading session but with a bullish bias and the pair broke the bearish trend line, moving into the target at 1.4200 before dropping lower.
The move lower generated by the FOMC Statement is likely to extend into the support at 1.4100 and possibly into the 50 period EMA. However, we don’t expect a break of these two barriers unless surprises occur. The overall trend is clearly bullish, so we favor the long side after a bounce at one of the mentioned support barriers.
Similar to the US Dollar, the Pound will be affected today by manufacturing data in the form of the Purchasing Managers’ Index. The survey is scheduled for release at 9:30 am GMT and the expected reading is 56.5; the impact is medium-to-low and higher numbers strengthen the currency.