U.S. Dollar Takes Beating Following FOMC Minutes

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 |  Includes: FXA, FXB, FXE, FXY, GLD, IAU
by: The Aft Deck

U.S. Dollar Trading (USD) was severely weakened after the FOMC not only downgraded the GDP forecast but some members raised the possibility of further expanding the $1.7 Trillion program. Stocks finished negative although did receive support from Geithner’s comments. Crude Oil was up $1.94 a barrel to close at $62.04. In US share markets, the Nasdaq was down 7 points or -0.39% and the Dow Jones was down -52 points or -0.62%. Looking ahead, Weekly Jobless Claims forecast at 630K vs. 637K previously.

The Euro (EUR) leaped from 1.3600 to 1.3800 on the back of the FOMC news and general increase in risk appetite. Failure from US stocks to finish positive took some of the shine off especially the EUR/JPY. April German PPI fell -1.4% vs. -0.2% forecast. Overall the EUR/USD traded with a low of 1.3582 and a high of .1.3832 before closing at 1.3780. Looking ahead, May PMI Services forecast at 44.5 vs. 43.8 previously.

The Japanese Yen (JPY) was mixed, gaining against the USD but staying relatively unchanged against the EURO and GBP. The late Dow sell off hurt weighed on the crosses. Recent Yen strength is starting once again to be a concern to the Japanese government with comments from officials they are watching the rates closely. Overall the USDJPY traded with a low of 94.44 and a high of 96.25 before closing the day around 94.60 in the New York session.

The Sterling (GBP) surged on the back of USD weakness but was also buoyed by Positive European stocks and a break lower on the EUR/GBP. UK CBI Industrial trends were unchanged in May at -56. Bank of England meeting minutes showed a 9-0 vote for the hold at 0.5% and increase in QE program. Overall the GBP/USD traded with a low of 1.5447 and a high of 1.5797 before closing the day at 1.5740 in the New York session.

The Australian Dollar (AUD) surged to fresh year highs just above 0.7800 but weakness in equities hurt the rally and the pair retreated. The Euro and the GBP took advantage of the underperformance of the Aussie. The rally in commodities underpins the AUD going forward supporting on pullbacks. Overall the AUD/USD traded with a low of 0.7685 and a high of 0.7811 before closing the US session at 0.7740.

Gold (XAU) managed to rally sharply from $925 to $940 before running out of steam. Overall trading with a low of USD$924 and high of USD$941 before ending the New York session at USD$939 an ounce.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3424

1.3531

1.3785

1.3830

1.3963

USD/JPY

93.54

94.15

94.60

96.70

97.84

GBP/USD

1.4944

1.5061

1.5750

1.5794

1.5885

AUD/USD

0.7451

0.7687

0.7745

0.8097

0.8348

XAU/USD

906.00

916.00

938.00

945.00

967.00

Click to enlarge

Euro – 1.3785

Initial support at 1.3531 (May 19 low) followed by 1.3424 (May 18 low). Initial resistance is now located at 1.3830 (May 20 high) followed by 1.3963 (Jan 5 high)

Yen – 94.60

Initial support is located at 94.15 (Mar 20 low) followed by 93.54 (Mar 19 low). Initial resistance is now at 96.70 (May 19 high) followed by 97.84 (May 11 high).

Pound – 1.5750

Initial support at 1.5061 (May 14 low) followed by 1.4944 (May 7 low). Initial resistance is now at 1.5794 (May 20 high) followed by 1.5885 (Nov 10 high).

Australian Dollar – 0.7745

Initial support at 0.7687 (May 20 low) followed by the 0.7451 (May 18 low). Initial resistance is now at 0.8097 (Sep 30 high) followed by 0.8348 (Oct 6 high).

Gold – 938

Initial support at 916 (May 18 low) followed by 906 (May 8 low). Initial resistance is now at 945 (Mar 26 high) followed by 967 (Mar 20 high).