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Dollar Stronger Ahead of GDP, FOMC

David Becker
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Dollar Stronger Ahead of GDP, FOMC

The US dollar gained traction on Wednesday after bouncing around during the Asian and European sessions. During the US morning the Commerce Department is scheduled to release Q1 GDP. The median forecast is for Q1 GDP to expand at a 1.0% pace, following a 2.6% rate in Q4. The Federal Reserve is scheduled to complete its two day monetary policy meeting today, and they are expected to keep interest rates unchanged and cut another 10 billion from their bond purchase program. Yellen is expected to remain dovish.

The BoJ announcement of unchanged policy, disappointed some who had been expecting an expansion in the 60-70 trillion yen annual pace expansion of the monetary base, which in the event was left unchanged as the majority had anticipated. Japanese data was disappointing, with prelim March industrial production coming in at +0.3% month over month, below the median for +0.5%, while the April manufacturing PMI dove to 49.4 after 53.9 in March.

The Yen move down on the BoJ Kuroda’s press conference, as he said there is some disagreement on the board with regard to when the 2.0% CPI target will be reached. This has been an issue that has previously pressured the yen. The updated official forecast today predicts CPI rising to 1.9% during the financial year to March 2016. The BoJ downgraded its economic growth forecast to 1.1% for the year through March 2015, revised down from a 1.4%. CPI is forecast to climb 1.3% in the current financial year, unchanged from the previous estimate, and 1.9% in the next financial year through to March 2016.

The USDJPY is caught in a 101.50 – 103.50 range which the RSI prints near 52, which reflects the current consolidation in the price action. The MACD is also printing near the zero index level, projecting a directionless market.

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