Forex markets have taken a cue from the FOMC decision and the dust is continuing to settle. The outlook on key majors have improved, but how sustainable is this view and will the bulls be able to make a breakout. I take a look at the technical outlook on Euro/Dollar and also how the recent market volatility is impacting on a key commodity currency, the Aussie dollar.

1. Weekly Outlook
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21st September by Richard Perry, Market Analyst
Macro Commentary
You would have thought that a dovish Fed would have been the toast of the markets. Previous decisions to prolong the
era of ZIRP (zero interest rate policy) and accommodative monetary policy have been an excuse for risk appetite to soar.
Not this time, so what was different? Well, traders are rather worried now about what the Fed is really signalling. For the
first time the FOMC pinned much of the blame of its decision not to raise monetary policy on “international
developments”. This is a concern because due to the globalisation of financial markets, the Fed cannot control the global
economy, so in effect the Fed is not in control of when it will raise interest rates. I also believe the reaction is one of
exasperation with forward guidance. There is a diminishing likelihood that the Fed will be able to hike rates this year, let
alone in the October meeting. The China slowdown is a condition that continues to bite and clearly the Fed is hoping that
the emerging markets problems caused from the fear of a Fed rate hike may now miraculously go away in the next few
months. It does seem doubtful. The Fed’s credibility has taken a significant blow as it would seem that even the bond
markets got it wrong. The vital tool of monetary policy normalisation seems increasingly like a pipedream.
WHEN: Wed 23rd Sep, 0245BST
LAST: 47.3 (revised up from 47.1)
FORECAST: 47.5
Impact: If it was not deemed to be important
anyway, there will now be huge focus on Chinese
data after the FOMC opted not to increase interest
rates due to “international developments”. The
release of flash manufacturing PMI takes on added
importance as it is forward looking and if it
continues to deteriorate then risk appetite will be
significantly impacted. A repeat of a fall to a multi-
year low that was seen last month will almost
certainly rule out an October rate hike (if it was
not already). Equities will be sold and safe haven
plays favoured, whilst the dollar will also be sold.
Must watch for: China flash Manufacturing PMI
Key Economic Releases
Date Time Country Indicator Consensus Last
Tue 22nd Sep n/a Eurozone Consumer Confidence -7.0 -6.8
Wed 23rd Sep 02:45 China Flash Manufacturing PMI 47.5 47.3
Wed 23rd Sep 14:45 US Flash Manufacturing PMI 53.0 52.9
Wed 23rd Sep 15:30 US Crude oil inventories -2.1m
Thu 24th Sep 09:00 Eurozone German Ifo Business Climate 108.0 108.3
Thu 24th Sep 13:30 US Durable Goods Orders (MoM ex transport) +0.3 +0.6
Thu 24th Sep 15:00 US New Home Sales 0.52m 0.51m
Fri 25th Sep 00:30 Japan CPI 0.0% +0.2%
Fri 25th Sep 13:30 US GDP (Q2 final) +3.8% +3.7%
Fri 25th Sep 15:00 US UoMichigan Consumer Sentiment (final) 87.0 85.7
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1N.B. Please note all times are BST (GMT+1), data source Reuters
Caixin China flash Manufacturing PMI

2. Weekly Outlook
21st September 2015
by Richard Perry, Market Analyst
Foreign Exchange
The Fed decision should ensure corrective near term pressure on the US dollar, but how long it lasts for remains to be
seen? A re-pricing of the dollar is already underway with a sharp decline on the Trade Weighted Dollar but the dust still
needs to settle and could drive volatility. However, I do not think that this is the beginning of a strong dollar bear trend.
The dollar has been rangebound for the past few months against several forex majors and I expect this will continue. The
euro has already come within a few pips of its old range high at $1.1465 and whilst a move towards the August spike at
$1.1710 is possible, I expect that a position towards the upper end of the medium term band will result with the pivot
band $1.1050/$1.1100 still featuring strongly in coming months. The ECB/Draghi could use verbal intervention to prevent
a euro bull run. It is interesting that the Bank of England’s MPC member Andy Haldane has talked of the potential for a
UK rate cut and although it is not to be unexpected from the most dovish MPC member, watch out for any further
comments from other MPC members. The commodity currencies have reacted strongly to the FOMC announcement and
are now staging a recovery, with the Canadian and Australian dollars making key medium term breaks.
WATCH FOR: Expect volatility to remain high as markets continue to trade off the legacy of the FOMC
decision. The China PMI data will drive risk appetite and a weak number could see safe havens benefit.
EUR/USD
Watch for: A consolidation around the range
highs
Outlook: The Euro rally stopped short at
$1.1460 on Friday as the rally induced by the
FOMC announcement ran out of steam. The
unwinding of the euro carry trade continue
and this could underpin the euro in the
coming months. The momentum on
EUR/USD is positive near term but the old
range resistance at $1.1465 will still be a key
barrier, a breach of which opens $1.1710.
There may be an early technical unwind of
the gains but I now expect the euro to trade
in the upper half of the range for the time
being, above the $1.1100 pivot.
AUD/USD
Watch for: Breaking the resistance at
$0.7260 is key for the recovery
Outlook: The outlook has improved with a
two week rally which has now broken the
downtrend that dates back to May. However
the first real resistance now comes into play
with the old floor around $0.7260. This
needs to be broken on a recovery to confirm
the improvement in the momentum
indicators and to suggest this is more than
just another bear market rally. The moving
averages are also still all in decline and if the
Aussie can break above $0.7440 then this
would be confirmation that the bulls are a
force to reckon with.
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FX Outlook
2

3. Weekly Outlook
21st September 2015
by Richard Perry, Market Analyst
Indices
A dovish Federal Reserve should have been bullish for equities, but after only an initial poke higher, the sellers have
swarmed in. But why? Well, the Fed is concerned by “international developments” which is a thinly veiled attempt to
generalise the impact of the China slowdown which has really hit sentiment in recent months. Whilst this should mean
that the Fed’s accommodative monetary policy will continue for the next few months at least, China is a problem that will
not improve in the near term. Concerns over future growth prospects are now paramount for equity investors and China
will be key. Commodity markets linked to China demand (oil and base metals) coming under pressure is negative for the
Basic Materials and Energy sectors that drive market sentiment. The huge selling pressure on the German DAX on Friday
also implies that anything that has a big export exposure to China will also be hit. The range plays on markets built up
over the past few weeks are now coming under pressure to the downside. The DAX is the chief concern from a technical
perspective and a closing break below 9928 would now suggest perhaps even a retest of the crucial August low at 9338.
The French CAC is also on negative watch after the support at 4500 has again come under big pressure. The FTSE 100
needs to hold up above 6028, whilst the S&P 500 looks far stronger than European indices, from a technical perspective.
WATCH FOR: Focus remains on Chinese data to drive sentiment so Caixin Flash manufacturing PMI could
be crucial. US data will also have a part to play which means flash PMI and durable goods will be eyed.
DAX Xetra
Watch for: A two day close below 9928
would be very bearish
Outlook: The sell-off on Friday has just
breached the support of the near term
range at 9928 and weakness continues.
Technically a breakdown confirm on a two
day break (remember the false upside break
2 weeks ago?) of the 9928 support which
would imply a downside target of 9475, but
more likely would imply a full retracement
to the low at 9338. Momentum indicators
remains bearishly configures and the near
term outlook is under real pressure. The
lower high at 10,336 is now key resistance.
FTSE 100
Watch for: A two day close below support at
6020 would be a bearish break
Outlook: The FTSE 100 remains rangebound
and managed to outperform other indices
on Friday as the selling pressure mounted.
The support though remains intact on FTSE,
for now. The market has been ranging
between 6020/6284 for the past 3 weeks
and this is a key moment. Investors are still
trying to decipher the implications of the
FOMC announcement and a two day break
below 6020 this week would be a big
indication of a bearish move. It would
immediately imply 5760 which would be a
test of the 5768 key August low.
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INDEX Outlook
3

4. Weekly Outlook
21st September 2015
by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
Precious metals have been boosted by not only the Fed not hiking but also the concerns over “international
developments” which suggests low inflation and low economic growth. Quite how high gold can go will be interesting as
the big bear trend is in at $1150. The oil price remains volatile and suggestions of a China slowdown (watch flash
manufacturing PMI) will suggest further demand concerns and downside pressure. The unexpected drawdown on US oil
inventories induced some support for oil last week and any repeat will again drive further volatility.
US Treasuries have had a turbulent time of it recently, but the truth is that the bond markets got the FOMC decision
wrong. In the very least they did not envisage exactly how dovish the Fed could be. Sharp reversals on the 2 year yield
and the 10 year have been tied with concerns also over global growth. The China data will continue to drive volatility
through these markets whilst the US flash PMI will also have an impact. The safe haven of core government debt seems
to be in favour once more for investors as yields on the 10 year German Bund and UK Gilt also plummet.
WATCH FOR: The China flash manufacturing PMI will be the release that drives sentiment on oil and base
metals, whilst also impacting on Treasury yields. The US data will also all be watched.
Gold
Watch for: A test of the long term
downtrend could be seen this week
Outlook: The dovish Fed has helped to
drive a recovery in gold, however, for now
I continue to see gold as a sell into
strength. The big long term downtrend
remains the overriding feature of this
chart and for now it is a bear market rally
again. All moving averages are lower and
there is little to suggest this is a
sustainable move. There would need to
be a breach of the key reaction high at
$1168.40 (also above the falling 144 day
moving average) for the bulls to start to
make an impact on the longer term chart.
US 10 year Treasury Yield
Watch for: A break below 2.109% would be
a significantly bearish move
Outlook: The sharp decline on the US 10
year yield has already looked to reverse the
gains through late August/early September
and the momentum is now negative. The
key support is the early September low at
2.109% and a breach would open significant
further downside and perhaps even a full
retracement back to 1.905%. The rolling
over momentum indicators (RSI and
Stochastics) suggest there could be plenty of
downside potential.
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COMMODITIES & BONDS Outlook
4

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Weekly Outlook
21st September 2015
by Richard Perry, Market Analyst