Forex news for US trading on July 27, 2016

  • Federal Reserve holds interest rates unchanged, says near-term risks have diminished
  • Full text of the FOMC decision
  • Spain's de Guindos celebrates his good fortune after EU let off
  • IMF: Yen's surge may undermine efforts to lower deflation risk
  • June 2016 US pending home sales 0.2% vs 1.4% exp
  • JPM cut US GDP forecast to 2.2% from 2.3%
  • US June durable goods orders -4.0% vs -1.4% expected
  • US MBA mortgage applications -11.2% vs -1.3% prior
  • EIA weekly US oil inventories +1671K vs -2000K expected

Markets:

  • Gold up $21 to $1341
  • WII crude down 98-cents to $41.94
  • S&P 500 down 2.6 points to 2166
  • US 10-year yields down 5.5 bps to 1.51%
  • EUR leads, JPY lags

The Fed decision led to a whipsaw in the US dollar. On the face of it, the headlines were a bit hawkish as the statement upgraded the assessment on the economy and said near-term risks had receded.

The initial reaction was higher in the US dollar across the board. USD/JPY hit 106.00 and EUR/USD fell to 1.0960, just above support at the post-Brexit lows. But the moves faded quickly and then reversed in the opposite direction about 30 minutes after the Fed.

To me, it speaks of profit taking on a crowded USD-long position but others might argue the Fed wasn't hawkish enough to really put Sept on the table. EUR/USD is heavily shorted rallied as high as 1.1060 (up a full cent from the lows) while USD/JPY faded to 105.15.

Cable climbed to a three-day high at 1.3230 from as low as 1.3100 in the immediate aftermath of the statement. It's been a tight range in GBP for the past two weeks and this might be an early sign of a break (but with the BOE next week, that's far from certain).

The other big story on the day was oil as yet-another bearish inventory report crushed an early rally. Crude fell to a session low from a session high on the headlines, dropping about $1.30 in the process.

Along with crude, USD/CAD reversed and hit 1.3250 on weak oil but the Fed sent it back down to 1.3160 in a brutal day of reversals for CAD traders.