U.S. Dollar Trading (USD) tested both sides of the market yesterday with USD strength in Asia on the back of risk aversion being negated by a massive reversal in US stocks. The FOMC met and held at 0.25%. The FED statement was mixed with a better economic outlook tempered by the extension of the Treasury buying program by one month and no time line for raising rates. US Trade Balance improved to -27bn vs. -28.4 forecast. Crude Oil Closed up $0.71 at $70.16. In US share markets, S&P ended +11 points (1.15%) at 1005, NASDAQ ended +29 points (1.47%) at 1998 and DOW JONES ended +120 points (+1.3%) at 9361. Looking ahead, July Retail Sales forecast at 0.7% vs. 0.6% previously.
The Euro (EUR) tested 1.4100 before bouncing hard on USD weakness in the US session, shrugging off the FOMC report to finish above 1.4200. June Industrial Production fell -0.6% vs. 0.3% forecast. EUR/JPY had a wild day trading in a 3 yen range on the change in risk appetite. EUR/GBP remained supported on GBP weakness. O verall the EUR/USD traded with a low of 1.4086 and a high of 1.4248 before closing at 1.4200. Looking ahead, German Q2 GDP forecast at -0.3% vs. -3.8%. EU Q2 GDP forecast at -0.5% vs. -2.5%.
The Japanese Yen (JPY) gained throughout Asia on the break of 95.80 on the USD/JPY. Shanghai fell 5% and the risk trade AUD/JPY and GBP/JPY were down over 2 and 3 Yen respectively at one point. The Reversal began mid Europe and Yen selling continued for most of the day as the downside test was seen as a failure. O verall the USDJPY traded with a low of 95.12 and a high of 96.80 before closing the day around 96.10 in the New York session.
The Sterling (GBP) tested 1.6400 in early Europe but bounced and the level was not threatened again as the market began to short cover with the rise in US futures. The Inflation report was weak as expected with rising Unemployment and Deflation expectations justifying the increase in BOE QE program last week. O verall the GBP/USD traded with a low of 1.6391 and a high of 1.6560 before closing the day at 1.6505 in the New York session.
The Australian Dollar (AUD) was the hardest hit in Asia breaking down to test 0.8180 on heavy AUD/JPY selling out of Japan. The US rally led to a major reversal of fortune with the Aussie finishing above the starting level at 0.8300. The Outlook is mixed with the weak China story competing with a buoyant US outlook. O verall the AUD/USD traded with a low of 0.8180 and a high of 0.8373 before closing the US session at 0.8300.
Gold (XAU) kept to know levels briefly popping above $950 an ounce on before slipping on Post FOMC USD strength. Overall trading with a low of USD$940 and high of USD$952 before ending the New York session at USD$949 an ounce.