Asian FX market open: lively ranges overnight

I hope the lively trade from overnight can wash over into Asia today. Cable was the big mover, enjoying a 300 pip range, and my initial target at 1.5285 has almost been met. EUR/USD has also been dragged higher but is likely to meet Sovereign selling between 1.3825/50. The AUD/USD keeps grinding its way higher and anyone trying to short this pair must be feeling rather disillusioned. USD/JPY continues to trade in tight ranges and will probably continue to do so for the rest of the month.

Good luck today (agus La Fheile Phadraig, which means happy St Patricks day to the non-Gaelic speakers!)

Geithner: No trade war with China

The Treasury Secretary says he has not spoken with Schumer on Senate bill. He’s not concerned about a trade war with China, he says. He has not yet made the judgment whether China is a currency manipulator.

ForexLive US wrap-up; Steady Feddy…

• S&P 500 closes well above 1150 old highs, up 9 points to 1159, highest since Oct ‘08
• Fed leaves policy unchanged; retains “extended period” language, upgrades economic outlook slightly; mortgage bond purchases to end on schedule at end of March
• S&P affirms Greece’s BBB+ rating, removes from credit watch, outlook still negative
• EU’s Rehn: Will review Greek situation in mid-May
• US Treasury: Unemployment to stay high for an extended period
• US Senate China currency bill takes shape, gains Republican backing
• US Treasury: China should move to more market-oriented forex regime
• BOE’s Bean: UK deficit unsustainable over medium-term, a factor behind GBP weakness
• US yields drop after Fed: 2-year note 0.91%, down 4 bp, 10-yr 3.65%, -5 bp

EUR/USD was boosted headed into New York trade by better than expected ZEW data and never looked back. It consolidated gains below 1.3730 before edging firmer at the 15:00 GMT fixing and finally racing higher (to 1.3771) after S&P affirmed Greece’s credit rating and removed it from watch for a downgrade.

We traded in choppy fashion in the run-up to the FOMC statement and slipping as low as 1.3716 just before the release and then soon racing to 1.3779 within moments. another dip, this time to 1.3730 was followed by a sprint to 1.3784 where we stalled ahead of rumored 1.3800 barriers. Technically, we closed above the downtrend in place since since December for the first time today.

Cable took off after the Fed, building on early gains on the heels of the Conservatives putting some distance between themselves and the ruling Labour party. Bearish comments on the pound from BOE member Bean did not prompt any selling from near session highs, a signal to GBP shorts to cover quick. Prices rocketed as high as 1.5259. Traders were badly burned on the day, having sold earlier after waves of M&A selling took the pound below 1.5000 in London early in the day.

USD/JPY eased slightly with US yields after the Fed but dips were limited on buying of JPY crosses like GBP/JPY and AUD/JPY as the era of cheap money was perpetuated by the Fed again today. Dips were limited to the 90.16 level in New York trade.

AUD/USD rallied to 0.9193 as risk trades performed strongly in New York afternoon trade. Whispers of options protection ahead of 0.9200 helped slow the advance. USD/CAD fell to its lowest levels since the summer of 2008 at 1.0137 today after triggering a 1.0150 barrier.

No news is good news for the “risk” trade

The steady-as-she-goes policy from the Fed is underpinning stocks and commodities and giving a lift to the risk trades in general. AUD/USD  is trying to establish a beachhead above the 0.9070 level and USD/CAD is getting comfortable below 1.0150. Cable is looking for a close above the former resistance at 1.5217 while EUR/USD has broken its downtrend and is chipping away at sellers stacked through the 1.3800 level.

Forex traders have a short attention span, so now that Greece has been taken off credit watch, the focus may shift to the US for a while. Lord knows there are enough US economic warts to exploit should the market turn its fire on the greenback.

An expensive new health care entitlement and an “infrastructure bank” announced today are just two new programs the government wants to adds despite $1trln deficits seen for the next decade or more.

A close above 1.3800 would go a long way toward swinging momentum against the dollar in the near-term, purely out of boredom, in my view…

BOE’s Bean: Policy could go either way, as needed

• UK deficits are unsustainable in the medium-term and are a factor behind the recent weakness of the pound
• Road ahead still bumpy, long way before recovery complete
• MPC ready to resume asset purchases (QE) or tighten policy if required.

Cable is holding firm despite the Bean comments. Usually we  would tumble on talk of unsustainable deficits, but the market trades as if it is short…Cable trades at 1.5230.

If we were to close right now…

…you would have to have to conclude that the euro and pound have made some some important technical headway today.

EUR/USD will have closed above the downtrend in place since the beginning of December and GBP/USD will have closes above the 1.5217 level that has capped rallies in that pair for the last three weeks.

EUR/USD trades at 1.3747 and cable at 1.5225.

Fed unchanged; gotta buy cable…

What do you do when nothing changes from one minute to the next? Why buy cable, that’s what.. The Fed was easy before 2:15 and they are still easy at 2:16…buy the pound!

The FOMC revealed nothing new in its statement, mildly upgrading their economic outlook as they have meeting after meeting but laying out significant roadblocks that still confront the US economy. Why anyone would use that statement as a reason to buy cable is one of life’s little mysteries. Hunting for stops is the most likely answer in thin markets, and a successful hunt it was. We reached 1.5243 after triggering stops in the 1.5220/25 area.

I wouldn’t fall in love with the pound up here…

USD/JPY easier after Fed; yields dip

Some anticipated a more hawkish Fed. Not today.

US bond yields are somewhat easier after the statement with 2-year yields now at 0.90% from 0.95% before.

I would not be surprised to see rates back at 0.95% this time tomorrow.

USD/JPY fell as low as 90.20 and has rebounded to the 90.45/50 area already…

Hoenig again a holdout

Hoenig voted against using the extended period language, saying he “believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability”.

EUR/USD rallied to a fresh high of 1.3779 as algos went into their typical post-FOMC frenzy. It quickly sold off and trades now at 1.3745. The statement is just what you would have expected and why we would trade from 1.3716 to 1.3776 on no news is a testament to the power of machines.

Fed leaves rates unchanged; “keeps extended period”

Looks dovish, at first blush…

Press Release

Release Date: March 16, 2010

For immediate release

Information received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the labor market is stabilizing. Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

In light of improved functioning of financial markets, the Federal Reserve has been closing the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability.