Forex news for NY trading on March 21, 2017.

In other markets near the US close:

  • Spot gold is up $21.23 or 1.62% at $1332.52
  • WTI crude oil futures are up $1.95 or 3.07% at $65.49
  • Bitcoin is trading down -$17 at $8888

The FOMC voted to raise rates by 0.25% to 1.75%. The decision was as expected. The Fed has now raised rates from a low 0.25% or +150 basis points.

The Fed's much watched dot plot forecasts that at the end of 2018, the Fed would have hiked 3 times. At the end of 2019, they would have added another 3 hikes (up from 2) to 2.75%-3%. The 2020 expectations for rates was also increased to 3.25% - 3.50% (from 3.00-3.25% prior).

So the Fed did not change 2018, but it raised 2019 by 1 hike and that followed through to 2020.

One would think the dollar would rise and rates would move higher.

What happened?

The dollar went lower, and rates went lower.

The table above shows the strongest and weakest currencies for the day. The USD (see chart in the top left corner) was in the red vs. all the major currencies. The JPY was the next weakest but it was well behind the changes in the greenback.

What happened to the US yields?

  • 2 year, 2.30%, -4.1 basis points
  • 5 year 2.670%, -2.6 basis points
  • 10 year 2.877%, -1.8 basis points
  • 30 year 3.107%, -2.3 basis points

Yield went lower on a hike and an increase in rate projections. Go figure...

Well the "figure", and the story can probably be focused on the commentary by Powell as he took the seat in front of the press for the first time as Fed Chair.

In addition to being less theoretical - economically that is (and therefore more direct), he also emphasized a number of times, that:

  1. The meeting today was about what to do with rates NOW. The answer was "Raise by 0.25%", and
  2. That the dot-plot that projects rates out beyond what we can see with any clarity, is not all that important.

Those ideas, more than anything, seemed to assuage the anxiety in the debt markets and bring the focus from "out there" in the theoretical world" to "now" in the real world.

Whether that will stand tomorrow or going forward - it still seems 2.88% in 10 year is too low - but it was good enough to keep rates contained, and lead to selling in the dollar.

At least that is how I figure it....

In other developments today:

  • The CAD was the strongest of the currencies today. It benefited from greater confidence on NAFTA. The US also said that they would drop the 50% requirement of US parts for cars made in member nations. The USDCAD fell below swing levels from October, November and December at 1.2907-1.2926 and is down testing a lower channel trend line (see chart below).
  • The EURUSD - after the data - stalled at the lower end of the swing low area at 1.2251-72. The price rallied above the 100 and 200 hour MAs at 1.2296 and 1.23227 respectively. The 1.23227 (200 hour MA) is now support/risk for the bulls.
  • The GBPUSD was also up strongly today and in the process, moved to test/break a topside trend line on the hourly chart at 1.4139 area. The high reached 1.4149 - the highest level since February 5th - but is backing off, back below the trend line into the close. Be careful in that pair into the new trading day as the trend line may be a level that traders lean against now.
  • The RBNZ kept rates unchanged at the end of the trading day. The NZDUSD moved higher into the decision but is working back toward the 100 hour MA at 0.7215. That MA will be a barometer for bulls and bears into the new trading day. Stay above, more bullish. Move below, more bearish.

Good fortune with your trading.