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Hawkish Fed Sends Dollar to Highs04 October 2018 by Dave Evans

Morning Report: 07.00 London

The US dollar is the currency of choice this morning after Hawkish Fed comments sparked a surge in bets on further and faster rate hikes. This was coupled with better than expected ISM non-manufacturing PMI.

The Australian dollar has been hit hardest, with the AUD/USD plunging yesterday to below 0.7100 with follow on selling this morning.

The EUR/USD extended its losing run with heavy selling yesterday, pushing the pair below 1.1500 as pressure mounted on Italy’s budget. The EUR/GBP is also suffering after further selling yesterday. The GBP/USD has also been selling steadily, but at a more measured pace than the euro as Brexit hopes rise on Ireland’s apparent backing.

The USD/CAD is reversing Monday’s opening gap lower, with large gains yesterday and the 1.2900 level a likely target. The USD/CHF also rallied further back towards parity yesterday.

The USD/JPY surged back towards the highs yesterday, with moderate selling this morning. Other yen pairs are firmly on the back foot, with the AUD/JPY rapidly selling off. The EUR/JPY is also struggling after reaching the highs at 133.00 last week.

Coming up today

At 14.15, we have FOMC Member Quarles speaking.

Canadian Ivey PMI is at 15.00.

Trade Idea

The AUD/USD continues to struggle this week, but it’s all in line with the longer term trend of a stronger dollar and pressure on Australia’s China.

October 4th 2018: Hawkish Fed Sends Dollar to Highs

A good way to play this is a LOWER trade predicting that the AUD/USD will close below 0.7050 in 14 days for a potential return of 148%.

October 4th 2018: Hawkish Fed Sends Dollar to Highs