The greenback has managed to increase in the second part of the day and recovered a little after the massive drop. EUR/USD dropped significantly in the afternoon, even if the United States data have come in mixed, but the decrease was somehow expected because the pair was too overbought to continue the upside movement.

The currency pair climbed as much as 1.1776 today, much above the 1.1739 yesterday’s high, has rallied after the FOMC Statement, as you already know, the Federal Reserve has decided to keep the monetary policy unchanged, the Federal Funds Rate remains steady at 1.25%.

The traders were disappointed and have sent the greenback much lower versus all its rivals because there are rumors that said that we may not see another hike this year. Personally, I believe that the FED could take action again if the US data will impress from September.

USD climbed today, even if the Unemployment Claims increased unexpectedly higher in the previous week, from 234K to 244K, more versus the 240K estimate, the Core Durable Goods Orders increased only by 0.2%, less versus the 0.4% estimate and compared to 0.3% growth in the previous reporting period.

The Prelim Wholesale Inventories have surged by 0.6%, more versus the 0.3% estimate, this was bad for the USD.

Personally, I believe that the USD was driven higher by the technical factors today, has received a helping hand also from the Durable Goods Orders, which increased by 6.5% in June, beating the 3.5% estimate and from the Goods Trade Balance, the indicator increased from -66.3B to -63.9B, more compared to the -65.0B estimate.

On the other hand, the Euro wasn’t impressed by the Euro-zone data, the Spanish Unemployment Rate dropped from 18.8% to 17.2% , much below the 17.8% estimate, while the Euro-zone M3 Money Supply increased by 0.5%, matching expectations. The Gfk German Consumer Climate increased from 10.6 to 10.8 points in July, beating the 10.7 estimate, unfortunately the Euro-zone Private Loans have increased only by 2.6%, less versus the 2.7% estimate.

EUR/USD dropped today, but the perspective remains bullish on the Daily chart, remains to see what will happen tomorrow because the US and the Euro-zone are to release significant numbers, so you should keep an eye on the economic calendar to see what will move the price.

NZD/USD found strong resistance at the third warning line (WL3) of the former descending pitchfork and now is challenging the 0.7484 static support (resistance turned into support). We may have a selling opportunity if will close below the 0.7484 level and if will retest the warning line (WL3), the first downside target will be at the 0.7375 level.

Brent rallied and looks determined to take out the dynamic resistance from the outside sliding parallel line (SL), a valid breakout will confirm a further increase towards the 53.03 resistance and towards the 61.8% retracement level. I’ve said in the previous analysis that is expected to increase further and now is trading right above the $51.50 per barrel. Was boosted also by the poor US Crude Levels, the indicator dropped to -7.2M in the previous week, much below the -3.3M estimate.

The currency pair dropped on Thursday, but continues to stay above important support levels and maintains a bullish perspective on the short term. Is moving somehow sideways on the Daily chart maybe because has tried to recapture more directional energy to be able to climb much higher in the upcoming period.

Is trading near the 129.90 level, but could retest some support level again today, we'll see how will react because the Yen looks undecided on the short term. Yen could increase significantly versus its rivals if the Nikkie stock index will drop in the upcoming days, the index failed once again to close and to stabilize above the 20058 static resistance, a drop towards the 19700 will force the EUR/JPY to decrease as well.

We'll see what impact will have the Japanese data, the Unemployment Rate could decrease from 3.1% to 3.0% in June, while the Retail Sales could increase by 2.3% and could exceed the 2.1% growth in the former reading period. The Tokyo Core CPI could increase by 0.1% in July, more versus the 0.0% in June, the National Core CPI by 0.4%, matching the 0.4% growth in the former reading period. The Household Spending will be released as well and could increase by 0.6% in the previous month after the 0.1% in May.

Price failed to reach the 130.76 previous high and now could come down to retest the median line (ml) of the minor ascending pitchfork and the upper median line (UML) of the major ascending pitchfork. The perspective remains bullish as long as is trading above these levels and above the 38.2% retracement level, we may have a buying opportunity if the support levels will hold, but only if the JP226 will climb and will stabilize above the 20058 level.

The next upside target will be at the 150% Fibonacci line (ascending dotted line), we'll have an important upside momentum if will close above the 130.76 previous high.

USD traders have been riding the Janet Yellen wave, with the USDX consistently getting clobbered day after day since peaking at the turn of the new year.

Nowhere has this broad USD weakness been felt more than in USD/CAD. Just take a look at the daily chart below.

USD/CAD Daily:

That bullish channel was looking SO good for so long too… But as we know in trading, all good things must come to an end, and when that channel broke, boy has that end been a reality check for the US Dollar!

Price has dropped all the way down to now settle at the horizontal level that formed the very beginning of the channel. Yep, a full 100% retrace.

But now we're here, could this be an opportunity to try and get long? Zoom into the intraday charts and lets have a look at what price action has been doing on the 30 minute chart below.

USD/CAD 30 Minute:

The head and shoulders pattern isn't my personal cup of tea, but it's a pretty obvious inverted one that we have here. Price has bounced so sharply, that it hasn't even been able to pull back into short term areas of previous resistance to turn into support!

The roller coaster

Apprehension and lack of commitment lead to the overnight USD roller coaster.After the powerful response to an FOMC statement that was mostly unchanged other than some minor tweaks on the inflation language, a case of the jitters set in. More so for those that chased the Euro topside and after realising there was nowhere to go but down when momentum stalled, panic ensued after surprisingly strong US economic data.

It was an unexpectedly volatile session that had a bit of everything for everyone, but it was the strong U.S. durable goods data that set the tone for the greenback which enjoyed unusually robust demand. Certainly, the Greenback is not out of the woods just yet but the dollar bulls are seeing some light at the end of the tunnel, and with some significant data around the corner, it might be too early to throw in the towel just yet.

Also, the US dollar was supported by the news that Republicans a statement saying they’re scrapping the border tax proposal

While the overnight dollar move is more likely about positioning rather than a bullish USD revival, a solid GDP print tonight followed up with a robust NFP next Friday should reinforce the Feds telegraphed view that the September balance sheet run off is on as is a rate hike in December.

Euro

The market is obviously long EUR and after the strong US durable good print dealers are left mulling over saturated EURO position knowing there’s a lot of important data to deal with between now and December. After all had been said and done, EURUSD had retraced all its post-Federal Open Market Committee statement gains.

Australian Dollar

The markets decided that the Fed rate path is entirely CPI-dependent and with four consecutive misses on the book and a five just as likely, the Carry trade roared back life. But what the market giveth the market taketh away. The surging US durable good orders has the street now looking for a robust US Q2 GDP, and this pivot has sent an overbought Aussie dollar tumbling overnight

USD/CAD Canadian Dollar Lower After Dollar Rebound

The Canadian dollar depreciated on Thursday against the US dollar after US economic releases were positive and gross domestic product (GDP) forecasts were upgraded for the second quarter. The Trump administration has also put forth a plan to get the much awaited tax reform policy plan in motion. Trump had promised tax reforms and infrastructure spending out of the gate of his presidency, but had so far put higher priority in more divisive issues. The pro-growth policy and the decision to drop the border tax shows a willingness from Republicans to abandon the controversial measures to assure a tax overhaul.

The US Bureau of Economic Analysis will publish the first estimate of second quarter gross domestic product (GDP) on Friday, July 28 at 8:30 am EDT. The market is forecasting a 2.5 percent gain in the advanced 2Q GDP figures. Growth is anticipated to have accelerated after a disappointing first quarter pace of 1.4 percent. A print below the forecast would be seen as a negative for the USD with the Atlanta Fed upgrading its forecast on Thursday from 2.5 percent to 2.8 percent.

A strong rebound in GDP growth would put the dovish FOMC statement into perspective. The concerns about low inflation were blown out of proportion in the Fed communication but could go either way if the growth of the US economy disappoints on Friday. The loonie has appreciated this year thanks to strong Canadian fundamentals and the quick hawkish turn form the Bank of Canada (BoC) that translated into a rate hike in July.

The USD/CAD gained 0.881 percent on Thursday. The currency pair is trading at 1.2556 after the USD rebounded following an improved GDP forecast and the Trump administration getting back on track to pass the promised tax reform. The loonie fell with no support from economic releases and despite the rise of oil prices.

The release of the first estimate of second quarter US GDP tomorrow at 8:30 am EDT will be the the highlight of the trading session. At the same time Canadian monthly data will be released. The US is anticipated to have grown close to 2.5 percent while Canadian monthly GDP gains are expected at 0.2 percent matching last month’s release.

Economic indicators have been mixed for the US economy. The U.S. Federal Reserve hiked the benchmark interest rate in June, but is awaiting signs of accelerated growth before committing to a third rate hike this year. Inflation in the United States remain weak but if employment and growth keep their pace of growth the central bank will hike as planned. A slowdown in the progress of the US economy would trigger a more dovish Fed which could put the dollar under downward pressure.

Oil prices were behind the decision from the Bank of Canada (BoC) to cut interest rates back in 2015 so with the stability provided by the Organization of the Petroleum Exporting Countries (OPEC) and other producers limiting output it makes sense to bring the rate back to previous levels. There are rumours that the decision did not sit well with the Canadian government as it could cause pain to high debt households. Real estate prices in Vancouver and Toronto have retreated for the moment, but it will take more than 25 basis points to trigger a correction. The central bank could follow through with another hike before the end of the year to bring rates back to 2015 levels and also keep the gap between American and Canadian rates to widen.

The price of energy has gained 1.138 percent on Thursday. West Texas Intermediate is trading at $48.83 on a volatile session where crude moved more than two percent intraday. Bigger than expected drawdowns in US inventories and what appears to be a change in strategy from shale drillers as US production is anticipated to slow down has given this round to the producers who agreed to cut production.

The Organization of the Petroleum Exporting Countries (OPEC) and other major producers will continue to limit production until March of 2018 with Saudi Arabia taking a leadership role but asking for more compliance to the agreed levels of production. Disruptions in Libya and Nigeria make them exempt of the deal, but as those issues are sorted production has growth threatening the efforts of the group.

Crude has gained 4.7 percent in the last five days as US production has slowed down as evidenced by shrinking inventories. The OPEC agreement is a long way in reducing the supply glut but so far its efforts have resulted in higher oil prices. Internal dissent and the difficulties of proper production compliance will be a challenge going forward as well as a ramp up from Brazil, Canada and US operations once oil reaches higher price levels.

Market events to watch this week:

Friday, July 28
8:30 am CAD GDP m/m
8:30 am USD Advance GDP q/q

Growth expected to have doubled from disappointing Q1

The USD dollar is higher against major pairs awaiting the release of US growth in the second quarter. Comments from the Trump administration on plans to move forward on tax reform in the Autumn has also put a bid on the greenback. Pro-growth policies have been delayed as healthcare and immigration took priority for the Administration, but now it appears there is real push them forward.

The US Bureau of Economic Analysis will publish the first estimate of second quarter gross domestic product (GDP) on Friday, July 28 at 8:30 am EDT. The market is forecasting a 2.5 percent gain in the advanced 2Q GDP figures. Growth is anticipated to have accelerated after a disappointing first quarter pace of 1.4 percent. A print below the forecast would be seen as a negative for the USD with the Atlanta Fed upgrading its forecast on Thursday from 2.5 percent to 2.8 percent.

Economic indicators have been mixed for the US economy. The U.S. Federal Reserve hiked the benchmark interest rate in June, but is awaiting signs of accelerated growth before committing to a third rate hike this year. Inflation in the United States remain weak but if employment and growth keep their pace of growth the central bank will hike as planned. A slowdown in the progress of the US economy would trigger a more dovish Fed which could put the dollar under downward pressure.

The EUR/USD gained 0.317 percent in the last 24 hours. The single currency is trading at 1.1665 after a rebound in 10 year yields and an upgrade GDP estimate form the NY Fed got the dollar back on its feet. The July FOMC statement was taken as dovish by the market, but the central bank stuck to previous messaging and regarding inflation removed the ambitious “somewhat” and is now squarely at below the two percent target.

Tomorrow's first estimate of second quarter GDP is expected to improve from the disappointing first quarter and could in hindsight make the Fed statement less dovish as the central bank has not backed down from its balance sheet reduction plans. The massive bond buying during its QE program will begin to shrink starting in the fall as per the economists and then the market will focus on a potential third rate hike in December.

The Trump administration appears to have moved on from the healthcare debate and is mounting a serious effort to introduce tax reforms in the fall. The joint statement by House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, Treasury Sec. Steven Mnuchin, National Economic Council Director Gary Cohn, Senate Finance Committee Chairman Orrin Hatch, and House Ways and Means Committee Chairman Kevin Brady was a shot in the arm of the dollar. The tax reform policy is not expected to have as much opposition as healthcare and could be the biggest win so far for the Trump Administration if it passes without issue.

The Fall calendar will be important for the dollar with NAFTA renegotiation to kick off in August, but continue through the last quarter of the year and the just announced tax reform process.

The price of energy has gained 1.138 percent on Thursday. West Texas Intermediate is trading at $48.83 on a volatile session where crude moved more than two percent intraday. Bigger than expected drawdowns in US inventories and what appears to be a change in strategy from shale drillers as US production is anticipated to slow down has given this round to the producers who agreed to cut production.

The Organization of the Petroleum Exporting Countries (OPEC) and other major producers will continue to limit production until March of 2018 with Saudi Arabia taking a leadership role but asking for more compliance to the agreed levels of production. Disruptions in Libya and Nigeria make them exempt of the deal, but as those issues are sorted production has growth threatening the efforts of the group.

Crude has gained 4.7 percent in the last five days as US production has slowed down as evidenced by shrinking inventories. The OPEC agreement is a long way in reducing the supply glut but so far its efforts have resulted in higher oil prices. Internal dissent and the difficulties of proper production compliance will be a challenge going forward as well as a ramp up from Brazil, Canada and US operations once oil reaches higher price levels.

Market events to watch this week:

Friday, July 28
8:30 am CAD GDP m/m
8:30 am USD Advance GDP q/q

Commodity currencies are looking at their most bullish since 2015 after the Federal Reserve struck a dovish tone on inflation at its latest monetary policy meeting yesterday, lifting the price of risk assets, including those of commodities. Commodity prices have already been on the up during the past month, boosted in part by growing demand from China – the world's biggest consumer of commodities.

This uptrend has helped drive commodity-linked currencies such as the Canadian, Australian and New Zealand dollars to 2-year highs, although the three currencies began their current rally in May. While doubts about the Fed's projected path of three rate hikes in 2017 and the reversal of the Trumpflation trade have been the main contributor in reducing the appeal of the greenback, the three currencies have had other factors pulling them up.

The Canadian dollar is up nearly 7% in the year-to-date against its US counterpart, as the Bank of Canada recently adopted a hawkish stance and swiftly proceeded with raising rates for the first time in seven years at its July meeting. Many analysts expect one more hike by the bank in 2017, with the Canadian economy set to become the fastest growing among the G7 this year according to the IMF's latest forecasts. Add to that some signs in the oil market that the global supply glut is receding and the willingness by OPEC members to take further measures, dollar/loonie may have more downside to go before it bottoms out. Though in the short term, a correction is looking overdue given that the pair's technical indicators are in overbought territory.

The Australian dollar has made even bigger gains, appreciating by almost 11% against the greenback so far this year. Unlike the Bank of Canada, the Reserve Bank of Australia is not yet ready to turn hawkish. However, this hasn't stopped market speculation about how soon a rate hike will come and the RBA has fuelled such talk by its own upbeat views on the Australian economy. More recently, expectations of a near-term rate rise have diminished as both inflation and wage growth remain subdued. But the aussie remains a relatively high-yielding currency, which it benefits from at times of risk-on sentiment.

The risk-sensitive Australian and New Zealand dollars have come back in favour with investors as the dollar falters on Trump's political troubles and a less hawkish Fed. Yesterday's FOMC statement was the most dovish the Fed has sounded this year regarding inflation, even as the US economy picks up some traction. Stronger commodity prices are also helping increase the lure of the aussie and the kiwi, as well as for emerging market currencies such as the South African rand, Mexican peso and the Russian ruble.

Base metals have been one of the big gainers in the commodities market recently. Copper futures prices have risen to the highest since May 2015 and iron ore is trading near 2-month highs. Other metals such as zinc, lead and aluminium are also up sharply this year. However, despite evidence that demand from China is on the up, metal prices are at risk of a reversal as part of this demand has come from companies replenishing their declining inventories, and China's economy is expected to slow in the second half of the year. Steel rebar futures have already come under pressure amid fears of an oversupply.

The aussie remains highly susceptible to any downside reversal in metal prices, particularly iron ore, which Australia is a major exporter of, as this would damage the country's terms of trade. The kiwi on the other hand is less vulnerable to the prices of resources as New Zealand is mostly dependent on dairy exports. In addition, the New Zealand government is enjoying strong finances at the moment and plans to increase infrastructure spending over the next few years, guaranteeing strong growth over the coming period. The kiwi has gained around 8.5% against the US dollar in the year-to-date as New Zealand's economy looks set to outperform other advanced economies.

Judging by the above, the aussie's rally appears to be the most overdone given the shaky outlook for metal prices. The loonie's gains are perhaps the most justified as the BoC is raising rates and crude oil prices seem to be turning a corner (though it's too early to say if oil is out of the bear market), while the kiwi is being supported by a strong New Zealand economy.

Another potential threat for commodity-linked currencies is that the dollar may yet resume its rally. Apart from the small possibility of a tax stimulus being announced in the US anytime soon, strengthening growth may push up wages and inflation much earlier than anticipated. This would inevitably lead to the Fed taking a more hawkish stance once again and the prospect of higher US rates could adversely impact global risk sentiment.

On Thursday, a day after the Fed decided to maintain benchmark rates unchanged, the Department of Labour released data on initial jobless claims recorded in the past week, while the Census Bureau published the number of new durable goods ordered for the month of June. Initial jobless claims edged up by 10 thousand and durable goods orders increased by more than double the expected figure. The core measure of durable goods orders, which excludes transportation items, marginally grew, but came in below expectations and the figure from the previous month. The dollar did not show any significant reaction to the data.

According to the Department of Labour, last week 244 thousand individuals (seasonally adjusted) applied for unemployment benefits, exceeding the 234 thousand from the preceding week (the result of an upward revision from 233 thousand) and the expected figure of 241 thousand. The four-week claims average, which irons out weekly volatility, remained unchanged at 244 thousand.

Regarding durable goods ordered for the month of June, the Census Bureau estimated that new orders for long lasting manufacturing goods increased massively by 6.5% month-on-month compared to a contraction of 0.1% in May, surprising analysts who instead anticipated a rise by 3.0%. This increase was the highest since August 2014. Core orders fell short of expectations, rising slightly by 0.2% and coming in below May's upwardly revised 0.6% (from 0.1% before). The bureau also released the June goods trade balance. The figures showed the trade deficit decreasing to reach $63.86bn, down from a $65.90bn in the previous month and below the $65.00bn that was expected. Exports picked up by $1.8bn in June to reach $128.6bn and imports decreasing by $0.7bn to stand at $192.4bn drove the deficit down.

Although applications for unemployment benefits rose during the past week, the labour market remains robust as the US economy continues operating close to full employment with the unemployment rate being at the lowest level since 2007 at 4.3% as of July 2017. Moreover, the decline in the trade deficit in June is likely to positively contribute to second quarter GDP growth given rising exports. US preliminary second quarter GDP estimates will be released tomorrow.

In the forex markets, euro/dollar didn't have much of a reaction to the data. Dollar/yen posted some minor gains within the first few minutes of data release, rising to 111.47 from 111.31 previously. In late European trading hours, euro/dollar was down 0.2% on the day, trading at 1.1661. Meanwhile, dollar/yen was 0.1% up at 111.57.