Talking Points:
- USDOLLAR Rallies as Fed Drops Unemployment Threshold; Sees Rate Hike in 2015
- GBPUSD Benefits From U.K. Jobless Claims, BoE Minutes- Higher High on Horizon?
USDOLLAR Daily
Chart – Created Using FXCM Marketscope 2.0
Still Appears to Be Searching for Lower Low as Downward RSI Trend Gathers Pace
Interim Resistance: 10,602 (38.2 retracement) to 10,615 (78.6 expansion)
Interim Support: 10,470 Pivot
TheFederal Open Market Committee (FOMC) dropped the 6.5 percent threshold for unemployment after reducing its asset-purchase program by another $10B in March, and the bullish reaction in the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) may gather pace as the central bank sees ‘sufficient underlying strength’ in the world’s largest economy.
Indeed, the Fed noted that the first rate hike should come in 2015 as the central bank lowered its unemployment forecast, while raising the inflation outlook, and it seems as though the committee will stick to its current exit strategy as it largely attributes the recent slowdown in economic activity to seasonal factors.
With that said, the press conference with Fed Chair Janet Yellen may heighten the bullish reaction in the greenback should the central bank head sounds more upbeat this time around, and the USDOLLAR may have set a key low around the 10,500 region if we see the Relative Strength Index (RSI) break out of the bearish trend carried over from earlier this year.
GBPUSD Daily
RSI Continues to Highlight Consolidation, But is the Higher Low in Place?
Interim Resistance: 1.6850-60 (78.6 expansion)
Interim Support: 1.6540 (38.2 expansion) to 1.6550 (78.6 expansion)
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Despite the market reaction to the FOMC meeting, the British Pound is outperforming against its major counterparts following the positive developments coming out of the U.K., and it seems as though the Bank of England (BoE) will do little to halt the appreciation in the sterling as it helps to achieve the 2 percent target for inflation.
The larger-than-expected decline in U.K. Jobless Claims paired with the ongoing pickup in wage growth certainly raises the BoE’s scope to normalize monetary policy sooner rather than later, and the British Pound may continue to benefit from the policy outlook as the central bank moves away from its easing cycle.
With that said, the GBPUSD may have set a higher low in March as long as it continues to hold above the 1.6540-50 region, and the pair may be well on its way to a higher high as price & the Relative Strength Index preserves the bullish trend carried over from the previous year.
— Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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