The US dollar declined sharply in overnight trading after the Federal Reserve announced that it would put rate hikes on hold. The bank cited the slow growth rate and tepid inflation as the reason for changing its decision. In December, officials had pointed to two more hikes this year. On the balance sheet, the bank reassured the markets that it was prepared to adjust its policy of winding down the program if the economy weakens.
The Japanese yen strengthened against the USD in overnight trading following the Fed’s interest rates decision. It was also supported by better-than-expected data from Japan. The industrial production for Japan declined by minus 0.1%, which was better than the expected decline of minus 0.5% and November’s decline of -1%. The foreign investment in Japanese stocks increased to 166.6 billion yen from a decline of 67.4 billion yen a month before.
It will be an important day for the euro today as the EU region releases data. Germany will release its employment numbers. The unemployment rate is expected to remain at 5.0% while the unemployment change is expected to fall by 11K. In Italy, the GDP for the fourth quarter is expected to drop to 0.3% from the second quarter’s growth of 0.7%. In Spain, the CPI is expected to rise by 1.1%, which will be slightly lower than the previous 1.2%. The EU GDP is expected to have risen by 1.2% in the fourth quarter. This will be lower than the third quarter growth of 1.6%.
EUR/USD
The EUR/USD pair rose sharply from yesterday’s low of 1.1406 to the current high of 1.1500. In the past week alone, the pair has risen from a low of 1.1288. On the four-hour chart, the price is above the 20-day and 40-day EMA and is trading along the upper line of the Bollinger Bands. The RSI has moved close to the overbought level of 70 while the Average True Range has continued to ease. The pair will likely continue moving up because of the dovish tone of the Federal Reserve. If it does, it will likely test the previous highs of 1.1570.
XAU/USD
Since August last year, the price of gold has risen from a low of $1160. Overnight, the price continued the upward trend and reached a high of $1325. On the daily chart below, the XAU/USD pair is trading above the 20-day and 40-day EMAs while the RSI has just hit the overbought level of 70 while the signal line of the stochastic oscillator is in the overbought level too. In the coming days, there is a likelihood that the pair will continue moving up. If it does, it will likely test the important support of 1.1365.
USD/JPY
The USD/JPY pair declined sharply in overnight trading to a low of 108.76. This price is below the important support of 109.12. It is also below the short and medium-term moving averages while the RSI has remained closer to the oversold level of 30. There is a likelihood that the pair will continue moving lower, with the next target being the 108.50 level
