USD knocked lower by Fed Mouthpiece - Vantage FX Market Wrap

[B]Recap
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[li]Fed Mouthpiece Jon Hilsenrath was up to his old market moving tricks last night writing in the Wall Street Journal that the Fed will be very dovish at next week’s meeting as it keeps the bond buying program in place but works on ways to articulate its desire to keep rates low for as long as possible
[/li][li] This fit nicely with the relative economic outcomes between the US and Germany over night and the result was that the USD got hit hard again. The Euro (1.3274), Sterling (1.5385), Yen (99.26) and Aussie (0.9242 +100 from the lows 12 hours ago) are all stronger as a result.
[/li][li] The NZD is also doing well after the RBNZ was a little on the hawkish side yesterday in the statement after their Board meeting and the Kiwi sits at 0.8061 against the USD and at 1.1446 against the Aussie – go figure!
[/li][li] Stocks in the US were down early in choppy consolidative trade but “The Hilsenrath impact” drove them back higher. At the close the Dow was up 0.09%, The S&P 500 rose 0.24% and the Nasdaq rose 0.74% with Facebook’s massive 25+% surge on the back of yesterday’s results helping this index outperform.
[/li][li] In Europe the impact of weaker price action in Asia, a warning from BASF and a poor performance of resources in London on the back of fears about Chinese growth, apparently, saw stocks close lower. The DAX was 0.96% lower, the FTSE fell 0.49%, the CAC only fell 0.17% and Spain managed to rally 1.09%
[/li][li] On The ASX today it might not be such a great day given the carnage in resource stocks in London but then again Asia might recover as the US did so it might be a volatile day.
[/li][li] On Bond markets the stronger IFO and improved Spanish unemployment didn’t help German bunds which were higher again up 1.85% to a yield of 1.68%. US rates were a little better bid with the 10′s falling to 2.58% after trading a little above 2.6% at one point
[/li][li] On commodity markets oil was higher in choppy trade closing at $105.61 Bbl, gold rose as the US dollar fell and sits at $1337 oz., Dr copper was unchanged and our friends Corn and Soybeans were smashed again down 2.6% and 2.9% respectively
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Data to end the week is fairly quiet with Japanese CPI, Singapore IP, German Import price index and French Consumer Confidence. So they may not be much to change the price action of the markets from last night.

Chop, chop, chop it’s been a week of back and forth.

[B]This Fed mouthpiece is getting up my nose[/B]

I have been ding this financial markets thing for a quarter of a century now and there is one thing that always occurs but is always counterproductive. That is, the whole Journo spokesman for a central bank idea.

The latest incarnation is Jon Hilsenrath of the Wall Street Journal and his status as the Fed Mouthpiece. You can understand why central banks will brief Journalists to help clarify their message but on e they are proven right right more than once their articles take on a certain Delphic significance and can themselves become as market moving as the Fed’s announcements themselves.

Such was the case again overnight and the USD was sold heavily as a result and millions would have been made and lost.

Whether Mr Hilsenrath is right or not is to me a moot point I the Fed and central banks want to brief the market then talk to us all just like company management must these days otherwise all the Fed is doing is creating the preconditions forked not less volatility.

His comments in the article are hardly earth shattering,
The Federal Reserve is on track to keep its $85 billion-a-month bond-buying program in place at its policy meeting next week, but officials will debate changes to the way the central bank describes its plans for the program and for short-term interest rates.

But for the moment he is the Oracle of Delphi!

[B]A quick look at the technical FX setup[/B]

The Aussie is sharply higher this morning on the back of the weaker US dollar. My short position is way to big for this intra-box vol and I will be cutting it back over the next 24 hours.

As you can see in the chart above the AUD is still in the box and might have just rejected the uptrend it broke out of earlier this week with last nights sharp move higher. It is going to be an interesting close for the week in about 24 hours

EUR has done a similar thing and I got it wrong yesterday and would have lost money on EUR had I had a trade on – which I didn’t but I must be honest. While below this line EUR can reverse lower back toward 1.3220.

Good Luck and have a great day

  • Greg McKenna, Vantage FX Analyst

NB: Please note all references to rates above are approximate and should not be used for trade reference

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