WEEK 5

WHAT MOVED THE MARKET

Federal Open Market Committee

What is the FOMC?

The Federal Open Market Committee is the US regulatory body charged with overseeing the country’s open market operations and the setting of monetary policy. Its public statements providing information regarding economic policies, outlooks and the US Federal Reserve’s decision on interest rates changes, significantly affect currency value speculation and therefore FOREX markets.

This week’s FOMC News

The FOMC statement released this week on the 20th March reveals that US domestic economic activity had slowed down and payroll employment had remained relatively stagnant, though unemployment was low and job growth was stable. It revealed the Federal Reserve’s decision to maintain its “patient” stance on target interest between 2.25%-2.5%. This is positive news for companies since it enables them to run larger account deficits and investments, as evident by Nasdaq rising up 0.35% to 7,750.7, along with index rises made by Dow Jones and the S&P 500. Additionally 10-year Treasury yields dived to their lowest levels in a year, sinking 8 basis points to 2.519%

How does it relate to Forex?

The FOMC’s dovish decision to maintain its interest rate at 2.25-2.5% caused the US dollar to fall sharply against all currency pairs, with EUR/USD increasing by 89 pips from 1.13573 to 1.14467 and the USD/JPY falling by 117 pips from 110.515 to 111.687, but regained some of this loss upon close. Gold and silver also followed bullish inclinations against the bearish USD with gold (1 Ounce) rising 0.99% to cost $1,313.38 USD and silver (1 Gram) rising 0.43% to cost $15.44 USD.

 

TECHNICAL ANALYSIS

 

AUD/USD

Figure 1: AUD/USD Daily Chart

The bullish month of March for AUDUSD have seem to come to an end with a closing high of 0.71285 and reaching as high as 0.71676. The pair has formed a bear flag during that period. The close this Friday (22nd March), has broken the flag indicating the start of a bearish trend. An overbought Stochastic RSI, supports the downside trend. The bears will test the first support at 0.70585, and second support at 0.70023. If the second support is broken, a lower low will be formed, which confirms a bearish continuation since February. However, if the bulls can hold the support at 0.70585 and break the 0.71285 resistance, forming a new high, the monthly bullish trend would continue.

 

USD/JPY

Figure 2: USD/JPY Daily Chart

It has been a bullish 2019 for USDJPY reaching a peak of 111.940, however the past month has been rocky for the pair as it went flat before dropping down to 109.817. The drop however does not indicate for a bearish trend. We see a confluence of support for the bulls, with a support level from February of 109.736 and the 0.5 Fibonacci Retracement (109.751). Furthermore, an oversold RSI reiterates for a reversal from the downtrend it has been experiencing. If the pair is able to bounce of the support with enough momentum, the bulls will test the 111.049 resistance (upward target).

Economic Calendar