The U.S. dollar remained heavy following the FOMC rate decision that kept the target rate range at 0.25-0.50%. The Fed did state that the case for a rate hike has continued to strengthen, but decided for the time being, to wait for some further evidence of continued progress toward its objectives. This vote saw the dissenters for a rate hike drop from three to two. Fed’s Rosengren who previously dissented went back to the majority, while Fed members’ George and Mester called for a rate hike. The Fed statement highlighted that the labor market has continued to strengthen and growth of economic activity has picked up from the modest pace seen in the first half of this year. They also saw that near-term risks to the economy are roughly balanced.
Earlier in NY, the October ADP employment change saw 147K jobs added to corporate payrolls, a miss from the 165K estimate and the weakest gain in 5 months. The September reading was revised from 154K to 202K. Friday’s non-farm employment change reading may have expectations lowered following this miss and last Wednesday’s October Final Michigan confidence reading of 87.2, the lowest since October 2014.
The US dollar index daily chart shows that the strong selloff that started on October 25th has tentatively respected the 38.2% Fibonacci retracement level of the 94.05 to 99.09 rally. If we bearish momentum continue, price could target a confluence of support from all three key SMA(s), which currently trade between 95.84 and 96.51. If we see a bullish bounce here, initial resistance may come from the 97.90 level and major resistance could come from the 99.50 level.
The trade: Sell Dollar Index at 97.90 with a stop loss at 98.30 and take profit at 96.70. The risk/reward ratio is 1:3