Fed cuts the funds rate by 25bps for a third consecutive time on Wednesday. G10 currencies love to make the way higher against the USD. 

As everyone expected, the Committee decided to lower the target range for the federal funds rate to 1-1/2 to 1-1/3%. 

Steve Liesman, CNBC’s senior economics reporter, said, “This time last year, the Fed Funds rate was 2.2% and forecast by the fed to be headed to 3.4% in 2020. With today’s cut, the funds’ rate is now 1.62%. So about 1.8% of cuts are now in the system: about 75bps in actual cuts, and a percentage point in the changed outlook.”

Post the Fed meeting, the dollar index dropped and closed below 200MA. The weakness continues this morning in Asia as well. Besides, the G10 currencies love to make the way higher against the USD. AUD and NZD lead among G10 block with a 0.60% gain each. 

Last week it was EURUSD, this week it is AUDUSD’s turn. Next what?

EURUSD:  The most exciting factor is that the common currency has broken out of the four-month bearish channel.

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AUDUSD: A bullish trend could push the cross towards the critical resistance located at 0.6950 ahead of 0.7000 its 50MA (Weekly). Going forward, a sustained trade above 0.7000 may induce another new rally towards 0.7080 its key resistance levels. On the weekly chart (below), the price has broken out of the 22-month descending channel and traced out a double bottom at 0.6670. On top of these, the price came out of the two-month narrow range. Suggesting further bullish run in the near term. As long as 0.6850 and 0.6800 are supports, watch out for 0.7080. 

The further return of USD weakness allows EM currencies to perform better. Turkish Lira and South African Rand are in focus.

USDMXN technical view

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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