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Market Analysis

Home » Featured » Dollar Rebounds Following Fed-Induced Selloff

Dollar Rebounds Following Fed-Induced Selloff

Posted by FXTimes in Featured - March 19th, 2015 2:25 pm GMT

US dollar USDJPY

The US dollar rebounded on Thursday, posting its biggest daily rally in a year-and-a-half after a cautious Federal Reserve signaled a more gradual path to rate normalization.

The dollar index, a trade-weighted average of the dollar against a basket of competitor currencies, climbed 0.6 percent to 99.12. The index plunged nearly 2 percent on Wednesday afternoon following the Federal Reserve’s policy statement.

 

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The EURUSD retreated sharply from its Wednesday highs, falling more than 160 pips to 1.0670. Initial support is offered at 1.0615 and resistance at 1.1076.

The USDCHF climbed 85 pips to 0.9913. It faces initial support at 0.9584 and resistance at 0.9827.

The USDCAD climbed to a daily high of 1.2765 on Thursday. It would subsequently consolidate at 1.2720, advancing 142 pips. The pair faces initial support at 1.2397 and resistance at 1.2785.

The dollar also posted solid gains against the British pound, Japanese yen and Swedish krona.

The dollar index is likely to find fair value at around the 100.00 mark, as investors continue to speculate about how patient the Fed will be in adjusting interest rates. The first rate hike is likely to materialize in September, leaving enough room for two rate adjustments this year.

In economic data, US jobless claims edged up slightly last week, adding further sign the labour market was on solid footing amid a broad slowdown in economic growth. The number of Americans filing first-time unemployment benefits increased 1,000 to a seasonally adjusted 291,000 for the week ending March 14, the Labor Department reported on Thursday. The less volatile four-week average rose 2,250 to 304,750 last week.

The economy added 295,000 nonfarm jobs in February, as the unemployment rate fell to a more than six-and-a-half year low of 5.5 percent. The Federal Reserve expects the unemployment rate to fall to as low as 5 percent this year, according to Wednesday’s revised summary of economic projections.

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