Last week we had some news from the US Fed’s Monetary Policy Statement and the subsequent press conference. The basic news was that the Fed was further reducing its bond purchases by a total of $10 billion a month. Mortgage backed securities would be reduced by $5 billion and longer-term Treasury securities would also be reduced by $5 billion per month. This news caused Treasury prices to fall sharply. As prices fell, yields on Treasury notes began to surge. Federal Reserve Chairwoman Janet Yellen also indicated that interest rate hikes may be in as little as six months from the end of the bond buying.
This bullish news for the US dollar quickly caused some significant strengthening of the US dollar. The moves were significant enough to cause an end to the trending Euro and Swissy and Kiwi. The majors are sitting at a crossroads right now. Will trends continue or reverse? Support or resistance levels will be tested.
Tomorrow will have some more economic news coming out that has the potential to cause some high volatility. The Durable Goods Orders for February will be released. More information from the Bank Stress Test Results will also come out. This news has the potential to further define last week’s news as bullish. Or do we end up with more questions about the economy? Either way, the news could be the impetus for breaking through current support or resistance levels.
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