News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Wall Street
Bearish
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Mixed
More View more
Real Time News
  • The Dow Jones and S&P 500 outlook appears bleak in the near term as retail traders increase their upside exposure. At the same time, these indices confirmed bearish technical warning signs. Get your market update from @ddubrovskyFX here:https://t.co/fKCHEKUd8O https://t.co/wWHBwTkp8Q
  • Odds of a #Fed rate hike by the end of next year jumped following the US CPI report Overall bets of a 25bp hike are up about 35% since the end of last week after #NFPs We still have Fedspeak left this week, but thus far seems markets have been focusing on the data https://t.co/6JR2qzCVg9
  • 🇯🇵 Bank Lending YoY (APR) Actual: 4.8% Previous: 6.3% https://www.dailyfx.com/economic-calendar#2021-05-12
  • 🇯🇵 Foreign Bond Investment (01/MAY) Actual: ¥-73.6B Previous: ¥132.8B https://www.dailyfx.com/economic-calendar#2021-05-12
  • Heads Up:🇯🇵 Foreign Bond Investment (08/MAY) due at 23:50 GMT (15min) https://www.dailyfx.com/economic-calendar#2021-05-12
  • Heads Up:🇯🇵 Bank Lending YoY (APR) due at 23:50 GMT (15min) Previous: 6.3% https://www.dailyfx.com/economic-calendar#2021-05-12
  • Heads Up:🇯🇵 Foreign Bond Investment (01/MAY) due at 23:50 GMT (15min) Previous: ¥132.8B https://www.dailyfx.com/economic-calendar#2021-05-12
  • RT @FxWestwater: #Bitcoin (BTC) Plunges on Tesla Bitcoin Suspension, $AUDUSD Spars USD Strength Link: https://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/asia_am_briefing/2021/05/12/Bitcoin-BTC-Plunges-on-Tesla-Bitcoin-Suspension-AUDUSD-Spars-USD-Strength.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Westwater&utm_campaign=twr https://t.co…
  • The Euro's technical posture against the US Dollar, Japanese Yen and Australian Dollar shows potential for near-term directional shifts. Here are the EUR/USD, EUR/AUD and EUR/JPY levels to watch. Get your $EUR market update from @FxWestwater here:https://t.co/7rW8FGPBUt https://t.co/jOxYD3Tyfe
  • Bank of England's Haldane sees UK inflation above the 2% target by year end - BBG
EURUSD to Extend Losses on Today's Federal Reserve Balance Sheet Unwind

EURUSD to Extend Losses on Today's Federal Reserve Balance Sheet Unwind

Justin McQueen, Analyst

USD Analysis and Talking Points

  • Federal Reserve Balance Sheet Unwind to Lead to Net Negative Liquidity Impact of $12.6bln
  • USD Typically Bid on Redemption Days

See our Q3 FX forecast to learn what will drive major currencies throughout the quarter.

Federal Reserve Balance Sheet Unwind

Last year the Federal Reserve announce that they would slowly begin to shrink the Federal Reserve balance sheet from October, starting at a rate of $6bln/month and working up to a maximum of $50bln, in order to unload the $4.5tln of bonds acquired by the central bank through its QE program.The Fed has been rolling over its holdings of debt on expiry date, however it is now in the process of letting the debt roll of its balance sheet and redeeming the full amount paid for the bonds, creating a demand for Dollars in the process.

Short Term Impact on the USD

Typically, on days with a large and negative impact USD liquidity, the Dollar has tended to gain while risk sentiment has been softer. At the last settlement day (Jul 31st) from the most recent SOMA (System Open Market Account) redemption (Jul 2nd), the USD gained against its major counterparts. Today marks the next redemption day in which the shrinking Fed balance sheet will lead to a net negative impact on US liquidity by around $12.6bln.

Dates

Par Value

Daily Impact on US Liquidity

Monthly Cap

USD Performance

Oct 31st 2017

$8.7bln

-$6bln

$6bln

0%

Nov 15th 2017

$11bln

-$3.5bln

$6bln

0%

Nov 30th 2017

$7.9bln

-$2.5bln

$6bln

-0.1%

Dec 31st 2017

$17.5bln

-$6bln

$6bln

0.1%

Jan 31st 2018

$27.6bln

-$12bln

$12bln

0%

Feb 15th 2018

$16.6bln

-$4.1bln

$12bln

-0.6%

Feb 28th 2018

$32bln

-$7.9bln

$12bln

0.3%

Mar 31st 2018

$31.2bln

-$12bln

$12bln

0.1%

Apr 30th 2018

$30.4bln

-$18bln

$18bln

0.3%

May 15th 2018

$26.2bln

-$8.6bln

$18bln

0.7%

May 31st 2018

$28.5bln

-$9.4bln

$18bln

-0.1%

Jun 30th 2018

$30.5bln

-$18bln

$18bln

0.4%

Jul 31st 2018

$28.5bln

-$24bln

$24bln

0.5%

Aug 15th 2018

$23.1bln

-$12.6bln

$24bln

Source: Federal Reserve

Long USD on SOMA Days

Based on the past 5 SOMA redemption days, long USD has been a good proposition, given that these days have on average coincided with the Dollar index moving higher by 0.36% with a hit ratio of 80%. Consequently, this could see the Euro extend on losses today with the mild support seen at 1.1300-10. A firm break below will likely put the pair on a run towards 1.1190, which marks the 61.8% Fib of the 1.0340-1.2555 rise.

EURUSD Price Chart: Daily Time Frame (March-August 2018)

EURUSD to Extend Losses on Today's Federal Reserve Balance Sheet Unwind

USD TRADING RESOURCES:

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES