Previous session overview

On Wednesday, EUR/USD had a calm start of the new trading session. The pair tried to regain the 1.23 mark, even as European equities opened lower on the back of a poor close in the US on Tuesday evening. In this respect, the euro also more or less ignored a renewed widening of the credit spreads on some peripheral European government bond markets. The European PMI's declined slightly from the previous month, but there was not negative reaction on the (currency) market. At the start of US trading, it even looked as if sentiment would improve further. However, a very poor US new home sales report spoiled the game. Stocks nosedived and EUR/USD copied this move, reaching an intraday low at around 1.2210 after the publication of the release. Markets then started to look out for the Fed statement. The Fed was a bit more cautious in its assessment as it acknowledged that financial conditions had become less supportive of economic growth. The Fed also took notice of the ongoing lo w inflation data. So, even as Fed member Hoenig continued to dissent in favour a tightening of policy, the overall feeling was that the Fed was not moving any closer to a rate hike. The economic conditions are likely to warrant exceptionally low levels of the Federal fund rate for an extended period of time. So, the dollar won't get interest rate support anytime soon. This caused some dollar losses across the board, even as the Fed message could have been considered as a source of concern on the pace of the global recovery (and a source of risk aversion). EUR/USD jumped north of the 1.23 mark and closed the session at 1.2311, compared to 1.2271 on Tuesday evening. At the same time, there was hardly any reaction on the US equity markets.

Market expectation

Today, the calendar in Europe is rather thin with only the EMU industrial orders data on the agenda. However, this figure is a bit outdated and won't have much impact on currency trading. In the US, durable orders and the jobless claims are on the agenda. Both data series are interesting and have market moving potential, at least in an intraday perspective. After the yesterday's reaction of the currency markets to the Fed statement, it will be interesting to see the reaction to today's figures, especially in case of weaker than expected data. Will this again have a negative impact on the dollar? This might still be the case for the likes of USD/JPY. However, with respect to EUR/USD trading, we assume that markets will soon return to the risk theme. So, we would be surprised to see the euro making further gains in case of poor US figures and a negative stock market reaction. Nevertheless, it is obvious that there is no dominant paradigm to guide the EUR/USD price action at this stage. So, we continue keep a close eye on the technical charts.

Disclaimer: the data made available by Dukascopy (Suisse) SAis for informational purposes only. Publication of this data by Dukascopy (Suisse) SA does not constitute provision of investment advice and Dukascopy (Suisse) SA assumes no responsibility with regard toany information, forecast or recommendation herein contained and assumes no responsibility with regard toany losses resulting from any activities conducted the basis of this data, including any investment decisions.

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