Wall Street cheers Fed decision to end balance sheet reduction
The US dollar index was little moved in overnight trading following the release of Federal Reserve meeting minutes. The bank’s officials signaled that they will complete the job of reducing the balance sheet this year. As a result of quantitative easing, the bank’s balance sheet increased from under $1 trillion to above $4 trillion. The minutes provided a boost to the market, which was unnerved by the process. In the meeting, the officials left interest rates unchanged at 2.25%-2.50%. They also signaled that there was need for patience before more rate hikes this year.
The Australian dollar was a bit volatile in overnight trading. This came after the Fed minutes showed the need for patience in rate hikes and after Australia released key data. The unemployment rate remained at 5.0% while the participation rate increased to 65.7%. This was higher than the expected 65.6%. The employment change for January was 39.1K, which was more than double than what investors were expecting. On the downside, the manufacturing and services PMIs fell below expectations. The two numbers were 53.1 and 49.3 respectively. The services PMI’s reading is an indication that the industry is contracting.
Investors will focus on the euro today ahead of key data from the European Union. The German headline CPI is expected to remain unchanged at 1.4%. The harmonized CPI too is expected to remain unchanged at 1.7%. Similarly, in France, the CPI number is expected to remain unchanged at 1.2%. In Germany, the manufacturing PMI is expected to improve to 50, from January’s level of 49.7. The services PMI is expected to slow to 52.8. Investors will also receive the minutes for the past meeting by the ECB.
The EUR/USD pair was relatively unchanged in overnight trading. The pair is now trading at the 1.1350 level. On the hourly chart, the pair’s price is along the 21-day and 42-day EMAs, while the RSI is at the 53 level. The Force Index is along the neutral level too. As a result of all this, the pair could move in either direction.
The AUD/USD pair was relatively volatile in overnight trading as investors parsed through key data from the US and Australia. Initially, the pair jumped to a high of 0.7206 and then pared those gains by declining to the 0.7140 level. It then started moving up and is currently at 0.7161. This volatility is evidenced by the Average True Range indicator, which has jumped as shown below. The accumulation and distribution indicator has also been rising. The price is currently along the 21-day and 42-day EMAs. The pair’s movements today will be influenced by the US durable order numbers.
The price of crude oil continued to rise after the release of US inventory numbers by the American Petroleum Institute (API). The XTI/USD pair reached a high of 57.45, as it continued towards the important resistance level of 60. On the four-hour chart, the pair’s price is above the 21-day and 42-day EMAs. It is also above all the other important EMAs. The Relative Vigor Index has moved up from the neutral level. The pair could continue moving up, although traders should pay close attention to and near the 60 level.