US Dollar rallied and Fed would be patient on rate hike

December 18, 2014

In the latest FOMC statement released earlier this morning, the board sent a signal to the public that the Federal Reserve would take delicate steps towards raising the benchmark interest rate in 2015. The phrase “considerable time” which describes how long the near-zero rate will be held now has been changed to “patient”. Ms Yellen’s speech, the chairwoman stated that the possibility of a rate hike in the next two FOMC meetings is very low, but almost every member expects that the normalization of monetary policies will happen in 2015. Some of them think that the timing may be mid-2015 considering that the current inflation remains at low level.

The Dollar index surged above the 89 level after Yellen’s speech as Fed confirmed to be moving forward to policy normalization while other major economics are still sticking to unconventional easing. The retreat of US Dollar now has finished and reversal signs have been left in the majors’ daily charts.

Euro fell to 1.2340 against Dollar, erasing the gains of last five trading days. RSI dropped back below 50.

Similar situation happened with Dollar Yen as it reversed all its loss from the last two days’ falling. The bullish channel remains perfect, showing the Dollar Yen may keep rising in the middle run.

Gold price fell to $1189 and tested the $1180 support during the day. Indicators like alligator, AO and RSI now have turned bearish, implying that $1180 may not support the price for long.

Back to the stock markets, the Shanghai Composite surged 1.31% to 3060. ASX 200 bounced 0.18% to 5167. The Nikkei Stock Average was up 0.38%. The European markets closed as mixed, the UK FTSE rebounded 0.1%, the German DAX fell 0.2% and the French CAC Index gained 0.46%. US market rallied as Federal Reserve retained its pledge to keep interest rates low. The S&P 500 closed 2% higher at 2012. The Dow surged 1.69% to 17357, and the Nasdaq Composite Index rocketed 2.12% to 4644.

On the data front, German IFO Business Climate will be released at 20:00 AEDST. UK Retail Sales will be at 20:30 AEDST. US weekly Unemployment Claims and Philly Fed Manufacturing Index will be out at midnight.

Have a great trading day!

Anthony


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