Forex today: dollar bull trap on FOMC outcome, G10's left at key levels

Forex today was keeping an eye on two potential catalysts on Wednesday, the ADP National Employment and the outcome of the FOMC's two-day meeting and Fed's interest rate decision. The outcome? A mixed dollar turned bid again and lower yields. 

The US Apr ADP National Employment, often regarded as a prelude to the nonfarm payrolls data that follows on Friday, arrived as 204k vs a consensus of 200k and 241k prior. As for the Fed, rates were left on hold and there were no nods at a June hike. However, after an initial drop in the greenback, sentiment turned over as did the dollar. The 10's peaked at 2.99% in London trade before drifting lower in the US, 2.96%-2.99 %. DXY traded between 92.2230-92.8340. 

"Fed funds futures yields fell fractionally and the 2 year treasury slipped from 2.51% to 2.49% on the slightly cautious notes in the FOMC statement, especially the use of “symmetric” which makes clear that if/when inflation finally runs above 2%, it would not prompt an aggressive interest rate response," explained analysts at Westpac.

As for other currencies, the euro was holding just above 1.20 the figure at the start of the US session before the ADP data that sent the euro down to a new trend low around 1.1950 before the Fed. The sell-off in the dollar made for 1.2025 i the euro where the trade was faded down to 1.2005 for the session close.

Sterling hit a post-Fed high of 1.3652 and closed the US session at 1.3576 after the turnaround the greenback made for a session low of 1.3554. The services PMIs are up next and need to come in as a beat of the pound is going to avoid a drop below the 200-D SMA at 1.3534.

The cross was closing the US session at 0.8810 and flat. The range was between 0.8831-0.8783 and unable to sustain a move through the 100-D SMA at 0.8810. Bulls can fall back on the positive EZ GDP data that came in-line at 2.5% from 2.7%, the strongest rate in 10 years.

The yen was testing space on the 110 handle, albeit shortlived with a high of 110.03. USD/JPY fell to 109.60 as an intraday low after the FOMC weighed on yields. Bulls eye the 200-DMA  and 61.8% Fibo at 110.23, 110.24 respectively. The market now has to wait for the nonfarm payrolls for next catalyst though.

As for the higher beta and commodity complex, opening at 0.7505 in a chop early on in NY after the ADP report where a low of 0.7475 was hit, the AUD/USD briefly handed the batton tot he bulls that took the pair from 0.7495 to 0.7537 post-FOMC, but it wasn't long before the bears took charge back to 0.7485, ended flat on the day. NZD similarly had a brief spike from 0.7000 to 0.7030 before falling to 0.6985 for a four-month low. EM's were hot hard as was EM-FX. Gold remains vulnerable to the downside.

Key notes from US session

Fundawrap: all about the Fed, if not just for an hourly stick

Wall Street stocks end lower post-FOMC

Key events ahead in Asia

Analysts at Westpac explained the key events ahead today: "At 11:30am Syd/9:30am Sing/HK we see Australia’s only notable data for the week – March trade balance and building approvals. Australia’s trade position has deteriorated over the past year or so but the -$A1.1bn deficit in Dec17 looks like an outlier. Consensus is for March to produce a similar surplus to February’s $0.8bn. Westpac is gloomier, looking for $0.2bn, with a softer AUD helping boost imports by 0.8%mth and exports -1% as iron ore prices fell.

The building approvals series is frequently volatile due to the lumpiness of apartment block approvals (private house approvals tend to be quite stable). The headline monthly changes in the past 4 months have been +13%, +21%, +17% and -6%. A small rise is expected in March, say 1%. Any major surprise should be ignored by FX markets.

A delegation of senior US officials is in China today and tomorrow for meetings on trade policy."