The Federal Open Market Committee left interest rates unchanged, yesterday, but opened the door wide, for a rate hike in December. They also announced that balance sheet reduction would begin in October.

The US dollar roared higher against the majors except for AUDUSD and NZDUSD.  Those moves were not extended (for the most part) overnight.

The Bank of Japan policy meeting was the major event in Asia.  The BoJ left rates unchanged but a new board member, Goshi Kataka dissented.  He wanted more stimulus. Elsewhere, Japan Prime Minister Abe is promising ‘daring policies” to boost the economy.  USDJPY rose from 112.20 to 112.70 but pared those gains in early New York trading.

AUDUSD and NZDUSD retreated steadily overnight, following what many believe was a “hawkish” FOMC statement.  New Zealand Q2 GDP was as expected at 2.5%, y/y.

As New York was opening, Bloomberg reported that S&P downgraded China debt from AA- to A+ with a stable outlook. USDCNH dropped from 6.5900 to 6.5838.  It has bounced to 6.5860.

EURUSD plunged from 1.2030 to 1.1865 after the FOMC announcement and then settled into the 1.1850-1.2050 range that has governed trading since September 8.  Traders are also waiting to hear what ECB president Mario Draghi has to say.  His speech is due at 10:00 am EDT.

Sterling, like the euro, dropped sharply after the FOMC meeting but stayed above 1.3450.  It spent the overnight session in a narrow 1.3474-1.3512 range.  Traders are looking ahead to UK Prime Minister Theresa May’s speech to the EU on Friday. Her Foreign Secretary, Boris Johnson’s essay earlier, highlighted a dysfunctional British Brexit plan.

Oil prices drifted off yesterday’s post -FOMC peak of $51.08/barrel and traded in a $50.39-$50.76 range.  Prices are supported by hopes that Opec will announce an extension to the production cuts at Friday’s meeting.

USDCAD traded narrowly overnight after spiking to 1.2385 from 1.2198 on the FOMC. Part of the steep rise can be attributed to a short squeeze, as stop-losses were triggered on the break above 1.2280. Firm oil prices will act as a drag on further rallies.

USDCAD Technical outlook:

The intraday USDCAD technicals are bullish while prices are above 1.2280, looking for a break above the 1.2360-80 area to extend gains to 1.2450.  A move below 1.2280 suggests a retest of 1.2210.  Longer term, the USDCAD downtrend channel is intact while prices are between 1.1865 and 1.2450.  A break above 1.2450 would target 1.2770.  For today, USDCAD support is at 1.2310 and 1.2280.  Resistance is at 1.2380 and 1.2420

Today’s Range 1.2310-1.2380

Chart:  USDCAD daily