The Federal Open Market Committee reaffirmed previous statements today at the 2PM release. Speculation earlier in the week hinted at a possible reduction in the unemployment threshold for an interest rate hike, but the Fed made it clear that the federal funds rate will remain at 0 to 0.25 percent at least as long as the unemployment rate remains above 6.5 percent.
Rhetoric in the release turned out to be a non-event, but that did not give the market an excuse to stay on the sidelines. Key support and resistant levels kept volatile USD crosses in a range over 100 pips wide, but USDJPY and USDEUR pairs failed to break above key resistance levels. Meanwhile, the Aussi held onto lows not finding much support with a strengthening Dollar as market participants await Chinese and Australian PMI.
Chart - Created Using FXCM Marketscope 2.0
From a fundamental standpoint, this release brings more confusion to an already confused market. Although the Fed often waves the transparency flag, thresholds for reductions in asset purchases remain arbitrary and subject to constant revision. Technicals outlined by the Daily FX team continue to determine strong levels as fundamental news events remain bound to inconsistent statements and revisions from the Federal Reserve. Although the Dollar looks to rally following any reduction in asset purchases from the Fed, until clear guidance is given from the central bank, volatile FX markets play a guessing game. Volatility may continue into the afternoon as today marks the last day of the month- not to mention key overnight event risks out of China and Australia.
Written by Gregory Marks, DailyFX Research Team