USD CONTINUES TO RISE AFTER FED MONETARY STATEMENT

The USD continued the upward momentum started on Wednesday after the Fed raised interest rates. It rose by 60 basis points against the euro, 25 bps against the sterling and 5 basis points against the yen. In the monetary policy statement, the Fed pointed to a December interest rate hike and three more in 2019. This was a more hawkish Fed than traders had anticipated. The dollar was further boosted by the GDP and jobless claims rates released yesterday. It was also boosted by the weak data from the EU and UK.

The euro fell even as Germany released better-than-expected jobs numbers for August. The numbers showed that in the month, the unemployment change fell by 23K, which was better than the expected 9K. The unemployment rate declined to 5.1% from the previous 5.2%. This was the lowest decline in decades and a signal of the strengthening German economy. The main reason for the euro’s decline was the disappointing core CPI number for the region. Data showed that the core CPI rose by 0.9%, which was lower than the expected 1.1%. The headline CPI number remained unchanged at 2.1%.

The sterling declined after the second quarter GDP growth was revised lower. Data from the Office of National Statistics (ONS) showed that the economy grew by 1.2% which was lower than the expected 1.3%. Growth during the quarter was attributed to increased consumer spending. At the same time, the current account of minus £20.3 billion was worse than the £19.4 billion that traders were expecting.

The Canadian dollar jumped after Statistics Canada released August’s GDP numbers. The data showed that the economy improved by 0.2% in August, which was better than the 0.1% traders were expecting. 12 of the 16 closely-followed sectors improved. On the negative side, the industrial product price index declined by 0.5% in August, which was lower than the improvement of 0.6% that traders were expecting.

EUR/USD

The EUR/USD pair declined sharply after weak CPI numbers from the EU and the hawkish tone from the Fed. This decline effectively ended the sharp rally that had been going on this month. The pair fell sharply to a low of 1.1569 which was the lowest level since September 12. It happened after the pair concluded the head and shoulder pattern as shown in the chart below. Further declines will see the pair test the important support of 1.1524, which is above the 38.2% Fibonacci Retracement level.

GBP/USD

The GBP/USD pair declined to an intraday low of 1.3030, which is an important support. It is also along the 200-day EMA as shown below. This ended the pair’s rally that started mid last month. The pair’s momentum indicator shows that the downward momentum is likely to continue. If it does, it will test the support of 1.3000, which is also an important psychological level.

USD/CAD

The USD/CAD pair declined after Canada’s economic numbers. The decline ended a three-day gain after disagreements between the US and Canada on NAFTA increased. It is now trading at 1.2978, which is slightly below the 23.6% Fibonacci Retracement level. It has also moved below the neckline of the head and shoulder pattern that formed a few days ago. This is an indication that the pair is likely to continue moving lower.