Article Highlights

  • Fed leaves interest rates on hold
  • FOMC statement hints at possible December rate hike
  • US good trade deficit: -58.6B USD vs. -64.9B USD expected, -67.2B USD previous
  • US EIA crude oil inventories: 3.4M vs. 3.7M expected, 8.0M previous
  • RBNZ keeps rates on hold, says further OCR cut “seems likely”
  • AU HIA new home sales, quarterly import prices on tap
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Forex traders saw a volatility party yesterday after both the Fed and the RBNZ dropped small bombshells on the markets.

The biggest story of the hour was the FOMC statement. Unless you’ve been living under a rock, then you should know that market players aren’t expecting the Fed to make any policy changes anyway. Instead, they were looking for signs on whether or not a 2015 rate hike is still on the table.

And boy did Janet Yellen and her gang sure deliver! There were no speeches made after the statement but the release itself already contained statements like “In determining whether it will be appropriate to raise the target range at its next meeting, the committee will assess progress toward its objectives of maximum employment and 2% inflation.” Translation: “We’ll SERIOUSLY consider it in December.”

Not surprisingly, the dollar zoomed higher across the board at the less-dovish-than-expected statement. Of course, it also didn’t hurt that concerns over slow global growth have been taken out of the official statement. Instead, the Fed only cited weakness in export and inflation as their reasons for staying pat.

EUR/USD fell by 168 pips (-1.52%) to 1.0901 while USD/JPY popped up by 75 pips (+0.62%) to 121.16. Other major pairs also went in favor of the Greenback with GBP/USD dropping by 27 pips (-0.18%) to 1.5262 and USD/CHF rising by 103 pips (+1.05%) to .9949.

Though it had the longest air time, the Fed wasn’t the only star of the show. The Reserve Bank of New Zealand (RBNZ) also made headlines when it printed its own policy decisions. The central bank kept its policies unchanged though speeches made by RBNZ Governor Graeme Wheeler attracted some forex bears. While the central bank is officially on “wait-and-see” mode, the RBNZ head honcho also warned that deeper rate cuts would be needed if the Kiwi continues to rise and dampens import prices.

NZD/USD capped the session 59 pips lower (-0.88%) than its open price while NZD/JPY also slipped by 19 pips (-0.23%) to 80.76.

See also:

London Session Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

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