S&P500 Erases 2016 Losses on Back of Fed Actions
The developments in the US markets again took centre stage in yesterday’s trading session. The US dollar continued on the offer on back of the dovish FOMC on Wednesday, sending the USD-Index to lowest levels since October 2015. EUR/USD printed March highs at 1.1342, but did not manage to break clear above the daily Wedge. Emerging market currencies enjoyed a decent rally and the same picture emerged in USD-denominated commodities. US stocks fared well compared to the rest of the developed markets, where risk takers held back. This has made the S&P500 cover the loss in 2016 so far and looks to close the fifth week with consecutive gains. In Yields, US 5yr and 10yr continued lower, while 2yrs traded slightly higher. EU yields have stabilised higher since last week, but short term buyers have re-entered long positions in Bund/Bobl/Schatz, so the pressure is for lower yields.
On the macro front, Central Bank activity was high yesterday. The Bank of England and Swiss National Bank left the policy monetary policy unchanged as expected and both were more or less non-events. Although no news was excepted from the Bank of Japan, they hit the wires “checking rates” after USD/JPY broke key support at 110.98 and sent the pair to the lowest level since 2014. Recently, we described a H-S formation in USD/JPY with a technical target around 106.30, which odds materialise have increased considerably post the FOMC.
In today’s trading, we see more profit taking in USD-pairs and expect a slight pull-back from the recent spiky moves. There are no data points from the Euro zone which should affect market actions, and in the US session, the U. of Michigan preliminary consumer sentiment for March could have an impact. The index is expected to increase to 92.2 from 91.7 in February. Canadian Dollar pairs could also come under fire, should the CPI at 13:30CET disappoint. USD/CAD has recently broken and closed below the 200-DMA and has found support at the 61.8% Fibo retracement in the recent wave. We expect selling on rallies will sustain as the main theme as oil continues on the bid.
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