- Fed’s decision to keep interest rates unchanged at its July meeting pushed the dollar sharply lower towards 93.00 area.
- Gold rose quickly and broke above $1260 after the release of FOMC decision.
- We will have U.S. international trade data and durable goods orders report for June.
The dollar index (DXY) dropped quickly towards 93.00 handle after FOMC announced to keep its interest rates unchanged at its July meeting and stated that it would start tapering its massive balance sheet in the short run. With the rhetoric of Janet Yellen’s speech less hawkish than some investors expected, chances of interest-rate hike by the end of 2017 fell to 45 percent, according to Fed funds futures. Therefore, the dollar weakened further and formed a new low for the year while other currencies and gold made some significant gains. Keep an eye on U.S. international trade data and preliminary durable goods orders for June today.
The dollar index declined quickly below H4-period EMA30 resistance after the announcement. However, from technical analysis perspective, its downtrend has been strong and solid indicated by its diverging long term moving averages remained stable and bearish in the correct order. Watch the downside movement and price actions in the short term.
（DXY H4 chart）
As to non U.S. currencies, the euro rallied to a new high for the year after touching H4-period EMA30 support, coupled with the announcement of FOMC. It will be interesting to see if the single currency could continue its uptrend with strong upside momentum in the short run. The pound rallied and touched a monthly high. It could stage a potential bullish breakout today as its H4-period moving averages remain bullish and in the correct order. The Australian dollar rallied and broke above its near term range after hitting the lower boundary of aforementioned range. The commodity currency extended its uptrend and tipped above 0.8 handle.
（AUD/USD H4 chart）
Now let’s take a look at precious metals. Gold bounced back after touching 61.8% Fibonacci level of the previous upleg. Pay attention to its sustainability of strong short-term upside momentum now that it broke above an old high of 1258.5 quickly and 1260 area, reinforced by its H4-period long term moving averages supports. It will still bow to U.S. economic reports later on today.
（Gold H4 chart）
By JasonZou —— Chief Analyst of AvaTrade China
Disclaimer: The views and opinions expressed in this article are those of the authors and for the purpose of reference only, and shall not be relied upon by investors in making any trading decisions.