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Fed surprised market with hawkish dots

Posted on: December 15, 2016

The Fed finally delivers with a 25bp that was expected universally. However, they surprised the market with an expected 3 hikes in 2017 on the dot-plot compared to the initial expectation of 2 hikes. With the change of expectation, the USD was all bid and no lid as it strengthened against all currencies. USD 10 year yield broke through the 2.5% resistance to a high of 2.58%. JPY was the worst performer as it broke through to a high of 117.39 in the afternoon.

Overnight, the USD continues to gain strength as traders scrambled to adjust their positions. USDJPY continues to be the preferred trade to express USD bullishness as it reached a high of 118.66 in London. With the clear divergence in the monetary policies between the US and the rest of the majors, USD strength should persist against most currencies into the beginning of 2017. I would be in a buy USD on dip mode but it may test your patience with the relentless USD buying.

Good luck trading!

  • Previous Day’s NA Range 1.3082 - 1.3295
  • Asia overnight range 1.3274 – 1.3324
  • London overnight range 1.3281 - 1.3349

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