Generally weaker as FOMC dust settles – Scotiabank

The Fed’s bold move was accompanied by a significant shift in the Fed’s outlook. The USD weakened before returning to trade little changed at Wednesday’s close. A clear push below 100.50/55 targets a dip in the 99.00/50 area in the near term and will indicate more sustained weakness in the index over the medium term, notes Shaun Osborne, chief FX strategist at Scotiabank.

USD back on the defensive this morning

“Chairman Powell projected his calmness in yesterday’s press conference, suggesting that the bold tapering was not a ‘recovery’ move but rather a recalibration in response to developments in the labor market and inflation since the last meeting. However, the prospect of a steady string of rate cuts in the US, compared to slower progress in Europe, will continue to put pressure on the USD over the medium term.”

“The choppy market response to yesterday’s decision – the USD weakened before trading little changed at Wednesday’s close – looks little more than adjustment after the USD turned defensive this morning.”

“Intraday price action for the USD looks quite soft and leaves the DXY support under pressure again around the 100.50/55 area. A clear push below this point targets a drop in the 99.00/50 area in the short term and will indicate more sustained weakness in the index in the medium term.”