Risk currencies struggle as the USD rallies

It has been all about the USD over the past 24-hours or so, as investors reacted to the outcome from the FOMC meeting. 

USD
Source: Bloomberg

While the initial comments were mostly construed as dovish, from the price action it is clear there has been a hawkish shift in sentiment. Initially, focus was on the fact the Fed maintained the line that it likely will be appropriate to maintain the current target range for the Federal funds rate for a considerable time after the asset purchase program ends. Many analysts were expecting this to be revised to a more data-dependant outcome rather than a timeline-dependant one. The key was the dot plot analysis, which showed a 0.25% upward revision to the median Fed funds rate expectation for the end of 2015 and a 0.375% upward revision for the end of 2017.  

Traders looking to sell AUD/USD on strength

Overall, the greenback gained ground across the board, with significant gains against the yen and the risk currency complex. After having recovered on the back of China stimulus news, AUD/USD was smashed lower upon retesting the $0.9100 handle. The pair dropped to a low of 0.8939 early in Asia, but has since recovered a touch. However, the price action is in a sharp short term downtrend and it’s likely traders will continue to look selling the pair into strength.

There is still significant event risk heading into the end of the week and attempting to buy the pair at current levels would be a risky move. With the Scottish referendum, Europe’s TLTRO allotment and Janet Yellen speaking again tonight, caution is warranted, but certainly shorts on risk currency pairs seem to carry higher probability.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.