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FOMC: US Dollar Edges Lower  as Fed Holds Rates, Extends Repos

FOMC: US Dollar Edges Lower as Fed Holds Rates, Extends Repos

2020-01-29 19:30:00
Rich Dvorak, Analyst
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FED DECISION: US DOLLAR CLINGS ONTO GAINS AFTER THE FOMC LEAVES RATES UNCHANGED AS EXPECTED BUT WILL EXTEND REPURCHASE AGREEMENT OPERATIONS (REPOS)

  • The US Dollar remains on its front foot after the January 2020 Fed meeting revealed that the FOMC left interest rates unchanged and stated it will continue repo operations through April
  • Changes to Fed language found in the latest FOMC press statement include a less-optimistic tone regarding household spending and comments on firming inflation
  • The Dow and spot Gold are extending intraday gains following the FOMC decision as traders await further details from Fed Chair Powell

As widely expected, the Federal Reserve left its benchmark interest rate unchanged at a target range of 1.50-1.75%.

Changes made to the January 2020 FOMC press statement from the central bank’s prior monetary policy update were sparse and thus warrant a muted reaction in the US Dollar so far.

Likewise, the response in the Dow Jones Industrial Average and spot Gold prices have been limited.

US DOLLAR INDEX PRICE CHART: 15-MINUTE TIME FRAME (JANUARY 28, 2020 TO JANUARY 29, 2020)

DXY Index Price Chart US Dollar January 2020 FOMC Decision

Chart created by @RichDvorakFX with TradingView

The US Dollar Index continues to trade above the 98.00 handle after eclipsing this technical barrier on the back of solid economic data yesterday.

USD price action could struggle to extend recent gains, however, seeing that the FOMC aims to extend its overnight repurchase agreement operations – or repos – at least through April.

Repo operations conducted by the Fed since September have overwhelmingly contributed to the massive $400 billion jump in total assets held by the Federal Reserve.

DOW PRICE CHART: 5-MINUTE TIME FRAME (JANUARY 27, 2020 TO JANUARY 29, 2020)

DJIA Price Chart Dow Jones January 2020 FOMC Decision

Chart created by @RichDvorakFX with TradingView

The Dow Jones Industrial Average is holding onto intraday gains thus far and could keep pushing higher with the prospect of additional liquidity injections from the Fed presenting a strong tailwind to equities.

Wall Street MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -7% 8% 2%
Weekly -5% -10% -9%
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GOLD PRICE CHART: 15-MINUTE TIME FRAME (JANUARY 28, 2020 TO JANUARY 29, 2020)

XAUUSD Price Chart Gold January 2020 FOMC Decision

Chart created by @RichDvorakFX with TradingView

Spot gold is pressing higher on confirmation that the Fed looks to continue expanding its balance sheet, but XAU/USD prices remain about 1% off recent highs.

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***THIS STORY IS STILL DEVELOPING – PLEASE BACK SHORTLY FOR THE FULL REPORT***

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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

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