Dollar strengthens against most major currencies after FOMC left interest rate unchanged at 0.75-1.00% as widely expected. Most importantly, Fed dismissed the weakness in Q1 and noted in the accompanying statement that "slowing in growth during the first quarter as likely to be transitory". Fed maintained that "with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace". Meanwhile Fed also noted that " labor market has continued to strengthen even as growth in economic activity slowed". And, "job gains were solid, on average, in recent months, and the unemployment rate declined." "Labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term." And, risks are "roughly balanced". While there is no hint about the timing of the next hike, the statement does nothing to change the expectation of a hike in June.
In response to the announcement, USD/JPY extends recent rally to as high as 112.65 and is still on course for next resistance at 115.49. USD/CHF stages a strong rebound after breaching 0.9893 low briefly. AUD/USD took out 0.7439 support to resume recent decline from 0.7748 and is on course for a test on 0.7158 support. USD/CAD is firm in tight range and more upside is expected with 1.3649 minor support intact. Nonetheless, while the greenback strengthens against Euro and Sterling, EUR/USD and GBP/USD are just kept in very tight range. In other markets, DJIA recovers mildly after trading in red in initial part of the session. Meanwhile, NASDAQ and S&P too are trading slightly down. 10 year yield trading up mildly but struggles to gain momentum above 2.3 handle. Gold extends recent decline and took out 1250 handle. WTI crude oil is trying to find support above 47 handle.
Thanks to the resilience in Euro, Dollar index continues to hover in tight range around 99 handle even though it recovers mildly after FOMC. We maintain the view that corrective pattern from 103.83 is still in progress. And such pattern is likely a triangle. There is prospect of another dip but there should be strong support above 50% retracement of 91.91 to 103.82 at 97.86 to bring rebound.
