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US dollar tanks on softer FOMC

EURUSD rallies like a homesick angel on dovish Fed. The February peak of 1.1376 is just around the corner. Surpassing this level, the euro-bulls could gather enough momentum to aim the 1.15 mark after five months. Pullbacks are expected to find support at 1.1140 (major 38.2% on Match 10 – 17 rise). Only a break below this level could signal a downside correction to meet the 200-dma (1.1043).

USDJPY tanked to 111.21 on smaller-than-expected surplus in Japanese trade terms in February and the broad based sell-off in USD. It is just matter of time before the pair tests the February 11th dip at 110.90. Below this level, a further fall to 107.25 (Major 38.2% retrace on September 2012 – June 2015 rally) will be the level to watch. A slide below the critical 107.25 should push the USDJPY in the bearish consolidation zone and could hint at a deeper downside correction to 105 handle.

The Bank of England will deliver the monetary policy verdict today at 12:00GMT and is expected to maintain the status quo. In his budget speech to the Parliament yesterday, Chancellor Osborne announced a sweet deal to voters and small business ahead of the June referendum on UK’s EU membership, yet the growth forecast has been lowered from 2.4% to 2.0% which pushed Cable down to 1.4053 in London yesterday. Happily, the GBPUSD recovered to 1.4376 in London but upside risks prevail. As the Brexit risks are being increasingly priced in, upside attempts on the pound are expected to remain capped. From a technical point of view, the first level of resistance is eyed at 1.4472 (minor 76.4%) on February slide) before 1.45 mark. Above 1.45, the pair could extend gains to 1.4668 (Feb high), while the failure to break above the 1.45 resistance should encourage a setback to 1.4242 (200-hma) before 1.4207 (major 38.2% retrace off the Feb 29 low).

AUDUSD surged to a fresh 8-month high (0.7650) mostly due to a broad based USD sell-off. As suspected, officials have started to voice their discomfort with the appreciation in the Aussie. RBA Assistant Governor Debelle said ‘would prefer a lower AUD’. AUDUSD is now ready to test the critical 0.7655 (Fib 61.8% retrace on May’15-Jan’16 decline). The RSI (70%) hits at an overbought market and could be the indication of a short-term correction back to 0.75 mark. More support is eyed before the 200-dma (0.7244).

Gold surged to $1270 after the FOMC dots showed that the Fed has eased its normalisation path. The Fed is now expected to raise the Federal funds rate two times only, compared to four times anticipated previously. Softer US dollar could sustain the recovery in gold prices to $1285/1300 mark. On the downside, the $1250 is now expected to lend some support before the minor 23.6% on December-March rally, 1228.42.

The recovery in WTI continues as oil producers announced to meet in Doha on April 17th, with or without Iran. The $410 mark is just around the corner, if cleared could encourage a further recovery toward the 200-dma ($42.82). On the downside, the 100-dma ($36.46) is expected to lend support before a pullback down to $35 mark is considered.

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