Market Update – June 20, 2017

Market Update – June 20, 2017

Now that the Fed’s interest rate decision and press conference are behind us, it is time to look at how the market reacted. In earnest, the U.S. dollar caught a strong bid. However, not on all the currency pairs.

 

Take the AUDUSD pair for example. For whatever the reason, the Aussie pair refuses to fall. And gold is not a reason anymore. The precious metal is way below the recent highs. Yes, the AUDUSD pair is not blinking.

 

The RBA monetary policy minutes came in line with expectations. Nothing surprisingly from the central bank. One way to explain the AUDUSD bullishness is the technical picture.

 

Commodity Currencies Well Bid

 

Not only the Australian Dollar enjoys a relative strength against its American counterpart. The Kiwi dollar and the Canadian dollar too. This makes commodities being bid while the rest of the currency on the Forex dashboard suffer.

 

The Fed’s message was very clear: the central bank keeps its hawkish tone and expects to raise interest rate even further. Moreover, the central bank announced a plan to trim down the size of its balance sheet. The overall program will be the most important one in modern central banking history. This is especially true if you think of the fact that the U.S. dollar is the world’s reserve currency.

 

The Euro fell against the dollar in another failed attempt to break the 1.13 level. In fact, the highs were 1.1295, almost taking the Trump’s election highs. For now, bears seems to be in control, but this could change in a blink of an eye as long as the 1.13 is still in sight.

 

Mixed Signals from Bank of England

 

Last week saw the Bank of England splitting votes as to wheater to raise the interest rates or not. Three members wanted a hike, which took the market by surprise. As a consequence, the GBP enjoyed a rally against all other currencies.

 

However, today, the Bank of England’s Governer, Mr. Carney, downplayed the possibility of a rate hike. Brexit negotiations just started and inflation still doesn’t warrant higher rates.

 

Conclusion

 

The Forex dashboard sends mixed signals this June. While EURUSD still sees sellers coming in, the AUDUSD pair looks bid. My take is that a triangular formation on bigger time frames forms on both pairs and the market simply consolidates, in a typical summer range. I’ll be willing to buy the dips in AUDUSD, if any, and looking for the EURUSD to jump above 1.13.

 

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