Forexlive Americas FX News Wrap: Fed Should Quickly Move Rates to a More Neutral Stance

The FOMC meeting minutes for the 50 basis point rate hike on May 4 have been released. The Fed said:

  • The Fed should quickly steer its monetary policy towards a more neutral stance
  • A restrictive policy may become appropriate
  • Officials stress that they were very attentive to the risks of inflation which were tilted to the upside
  • Price pressures remain high and it was too early to be sure that inflation was at its peak

Minutes details added:

  • The US economy was very strong with an extremely tight labor market and very high inflation
  • Members of all Ukrainian conflicts and Covid blockages in China pose heightened risks
  • Most officials backed 50 basis point rate hikes in next two meetings

Although the minutes were about as expected, the stock market breathed a sigh of relief and that helped push the dollar lower on some risk flows. Maintaining some technical levels also helped in the FX markets:

  • EURUSD: The EURUSD found supportive buyers against its rising 100 hourly moving average on 2 separate tests today. The 100-hour moving average is currently at 1.0645. It is now above the 50% midpoint of the move down from the April 21 high at 1.0642 and also above a swing zone between 1.06336 and 1.0641. The current price is trading at 1.0678 through the close with bullish targets between 1.0696-1.07061 and the 61.8% retracement of the same move from April 21 at 1.07113.
  • GBPUSD: GBPUSD broke below its 100 hour moving average during the morning session in London, but recovered above that moving average level later in the morning session in the US. Traders supported against this moving average twice during the US session before rallying towards the end of the day. The 100-hour moving average sits at 1.25236. The current price is at 1.2581. Breaking above Monday’s high at 1.2600 and Tuesday’s high at 1.2598 would open the door for further bullish momentum on the new trading day.
  • USDJPY: USDJPY rose to test its 100 hour moving average currently at 127.50 and found sellers against that moving average. Recalling yesterday, the same moving average also blocked the rally (albeit at a higher level). The 100 hourly moving average will continue to hold as resistance in the new trading day (at 127.50). The current price is trading at 127.29. On the downside, a move below the 127.00 level would give sellers more confidence in a run towards the 50% midpoint of the upside from the April 5th low at 126.324.
  • NZDUSD: NZDUSD retraced most of the gains after the RBNZ rate decision in the New York session, but found support buyers just ahead of its rising 100 hourly moving average currently at 0.6438. Price found buyers against this level and pushed price to a New York session high of 0.6484 before turning slightly lower to close at 0.64737. On the upside, moving above last Friday’s highs near 0.6490 would then target the high price from the post rate decision down to 0.65135.
  • USDCAD. The USDCAD closes just around its 100 hourly moving average at 1.28135 after trading above and below for the last 3 hours of the trading day.

The strongest major currency was the GBP, followed by the NZD. The weakest were the EUR and the JPY. The US Dollar was slightly higher/mixed.

In other markets today:

  • spot gold fell -$14 or -0.75% to $1852.30
  • Spot silver fell $0.15 or -0.68% to $21.93
  • WTI Crude Oil rose $0.94 to $110.71
  • Bitcoin reached the $30,000 level but retreated to $29,739 currently

In the US debt market, returns were little changed.

Finally, in the US stock market, major indexes rose and hopes for a weekly gain are still on track. Although after near revenue from Nvidia and Snowflake, this idea may be defeated. However for the day:

  • The Dow Industrial Average rose 191.66 points or 0.6% to 32120.29. It closed at 31261.91 on Friday
  • The S&P index rose 37.25 points or 0.95% to 3978.74. It closed at 3901.35 on Friday
  • The NASDAQ index rose 170.30 points or 1.51% to 11434.75. It closed at 11354.62 on Friday

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