The dollar is trading at firmer levels across the board in the wake of the Fed's 25 bp rate hike and guidance for "gradual" tightening hereafter. The Fed's restrained hawkishness, with future rate hikes to be dependent on data, coupled with its optimistic view of growth has been tonic for markets, with Wall Street and Asia-Pacific equity markets rallying. The S&P 500 closed 1.5% for the better, while in Asia Japan's Nikkei 225 crossed the finishing line with a gain of 1.6%, and China's Shanghai Composite is presently showing a 1.3% gain. In the forex arena, EUR-USD clocked a 10-day low at 1.0832 in Asia, since settling around 1.0850. USD-JPY posted a one-week peak of 122.64. AUD-USD made a two-day low of 0.7163, holding above Monday's three-week nadir at 0.7159. Attention will fall back on data as markets grapple with future Fed tightening in the "new normalization" era. Today bring jobless claims, the Philly Fed manufacturing index and Q3 current account reports, which we expect to be collectively dollar positive.
[EUR, USD]
EUR-USD clocked a 10-day low at 1.0832 in Asia, since settling around 1.0850. The move reflects general dollar strength in the wake of the Fed's 25 bp rate hike and guidance for "gradual" tightening hereafter. The Fed's restrained hawkishness, with future rate hikes to be dependent on data, coupled with its optimistic view of growth has been tonic for markets, with Wall Street and Asia-Pacific equity markets rallying. We expect incoming U.S. data to be positive, which should keep EUR-USD's bias to the downside. Initial focus is on the Dec-7 low at 1.0796.
[USD, JPY]
USD-JPY posted a one-week peak of 122.64 in the wake of the Fed's rate hike. The yen also gained ground against the euro, with EUR-USD having been the main conduit for dollar bulls. USD-JPY breached its 20-day moving average at 122.45, while the confluence of 50-, 100- and 200-day moving averages, which are currently converging at 121.56-75, markets a key support zone. Recent data out of Japan have been encouraging. We look for gains to extend above 123.00.
[GBP, USD]
Sterling has posted its third consecutive daily decline against the resurgent, post-Fed hike dollar, though the pound has been fairing better against the euro. We anticipate Cable will test its Dec-1 low at 1.4895. Resistance is now marked at 1.5000 and 1.5029-30. Weak wage growth, as revealed in yesterday's UK jobs report, has dented BoE tightening expectations as this is a key metric the Old Lady is monitoring.
[USD, CHF]
EUR-CHF has remained heavy with the euro bearing the brunt of dollar buying following the Fed's tightening. The cross logged a one-month low of 1.0780 in the wake of the Fed's announcement, and has remained heavy since. We still expect EIR-CHF to remain comfortably above the sub-1.0500 levels that prevailed earlier in the year before the SNB cut the deposit rate to -0.75%.
[USD, CAD]
USD-CAD clocked a new 11-year peak of 1.3847 amid the latest down-leg in oil prices. The pair has remained below this level even in the wake of the Fed's rate hike. Support is marked by the former high at 1.3781.
