Rate Pause: Fed Cautious, Foreign Pairs on the Move

Overview

USD - Fed Holds Rates Steady, Dollar Weakens

• Fed keeps rates at 4.25% - 4.50%
• Concerns over inflation and slowing growth
• USD weakens as markets price in potential stagflation

JPY - Yen Gains as Risk Sentiment Shifts

• Dollar weakness post-Fed fuels JPY strength
• Safe-haven demand increases amid economic uncertainty
• USDJPY retraces towards key support levels

AUD - Aussie Struggles Amid Economic Weakness

• Slower GDP growth and weak consumer confidence
• RBA’s dovish stance limits upside potential
• AUD underperforms compared to NZD

NZD - New Zealand Exits Recession, Kiwi Holds Firm

• Positive GDP data confirms recession exit
• RBNZ delays rate cuts, boosting NZD
• Market confidence improves with resilient labor market

EUR - Euro Finds Support as Geopolitical Risks Ease

• Russia-Ukraine ceasefire stabilizes sentiment
• EU’s Digital Markets Act increases tensions with U.S.
• Euro holds key support levels amid regulatory shifts

GBP - Sterling Faces Headwinds as UK Growth Slows

• UK economic data shows slowing growth
• Inflation remains high, pressuring BoE policy
• GBP struggles with uncertainty over future rate hikes

CAD - Oil Prices Support Loonie Despite Rate Pause

• Strong oil prices support CAD strength
• BoC holds rates steady, limiting bullish momentum
• Economic weakness and slowing demand could weigh on CAD

CHF - Swiss Franc Gains on Safe-Haven Demand

• Risk aversion boosts CHF inflows
• SNB cautious on policy, maintaining stability
• CHF remains a preferred safe-haven asset

Fed Holds Rates Steady – But Is Stagflation on the Horizon?

The Federal Reserve just wrapped up its March 19, 2025, meeting, and if you were hoping for a rate cut, you might need to wait a little longer. The central bank is holding the federal funds rate steady at 4.25% to 4.50%, signaling a cautious approach to the economy’s next moves.

The Economy: Is Stagflation on the Way?

Growth is Slowing: While the Fed describes economic activity as “solid,” recent indicators show signs of a slowdown in consumer spending and business investments. The economy isn’t crashing, but it’s not roaring ahead either.

Inflation is Still Sticky: Prices aren’t coming down as fast as expected. The Fed’s latest projection puts 2025 inflation at 2.7%, slightly above its previous estimate of 2.5%. This is worrying because higher inflation with slowing growth is a classic stagflation warning sign.

The Job Market is Holding—for Now: Unemployment is still low, but companies are starting to slow hiring, and some industries are seeing increased layoffs. If inflation remains high while job losses increase, stagflation could become a reality.

What’s the Fed Doing?

No Rate Cuts Yet – With inflation still above target, the Fed isn’t budging. Holding rates high helps keep prices in check, but it also risks further slowing the economy.

What Happens If Stagflation Hits?

If stagflation becomes a reality, it won’t be pretty. Here’s what could happen:

The U.S. Dollar Could Weaken – In a stagflation scenario, the dollar could lose value as investors lose confidence in U.S. economic stability. If global markets sense weakness, they may shift toward other currencies or assets like gold and commodities.

Stock Markets Could Struggle – Historically, stagflation has been bad for stocks because high inflation cuts into corporate profits while slow growth reduces demand. Tech and consumer stocks are especially vulnerable, while defensive sectors like utilities and healthcare might hold up better.

Borrowing Could Stay Expensive – If the Fed keeps interest rates high to fight inflation, mortgage rates and loan costs will remain elevated. This could make homeownership harder and slow down the housing market.

The Fed’s Dilemma – The central bank faces a tough decision:

• Cut rates too soon? Inflation could surge again.
• Keep rates high for too long? Growth could stall, and layoffs could rise.

Dollar Sell-Off on Rate Pause

After the release of the Fed’s rate policy and projections, the U.S. dollar weakened as markets reacted negatively to the lack of a rate cut timeline. With the Fed opting to hold rates steady, investor sentiment shifted, signaling concerns that stagnant policy amid persistent inflation could erode the dollar’s strength in the near term.

Technical Outlook

Break and Retest of Liquidity Zones

• Price initially rallied but got rejected from the supply zone (highlighted in red).
• The liquidity sweep at 103.22 - 103.19 indicates a failed attempt to establish a bullish structure.

Upside Rejection

• Repeated failures at resistance levels signal that buyers are struggling to push higher.

Moving Averages Acting as Resistance

• The 50 EMA (purple line) continues to cap upside attempts.

Momentum and Structure Breakdown

• A strong bearish engulfing candle formed at the latest rejection area invalidating the rally prior to Fed’s rate policy decision.
• A lower high and lower low formation suggests further downside continuation.

Bearish Outlook and Key Levels to Watch

🟥 Bearish Scenario:

• A break below 103.19 could trigger a move toward 102.80 - 102.50 in the short term.
• If momentum accelerates, 102.20 - 102.00 may come into play as the next liquidity target.

🟩 Bullish Reversal (Low Probability for Now):

• Bulls would need to reclaim 103.50 - 103.80 for any sustainable upside.
• A clean break above 103.90 would shift momentum back toward 104.00+ levels.

With the U.S. Dollar Index (DXY) selling off, key USD majors are experiencing shifts in momentum. A weaker dollar generally means stronger counterparts, but each pair reacts differently based on fundamentals and technical positioning.

USDJPY

Daily

With Yen gaining traction, we are now getting back inside the previous range.

4-Hour

If Yen creates a structure inside the range, we are looking for a breakout for an upside potential.

4-Hour

After the release of Fed rate policy decision, USDJPY went down in favor of the Yen.

We are looking for further downside as we already broke down the previous range.

AUDUSD

Why Is the Australian Dollar Lagging Behind the New Zealand Dollar?

Despite New Zealand's economic rebound and the Kiwi dollar's relative strength, the Australian dollar (AUD) has been struggling to keep pace. While both economies share similarities, key differences in economic data, central bank policies, and global market sentiment have diverged the performance of AUD and NZD.

Key Reasons Behind AUD’s Underperformance

Slower Economic Growth – Australia’s GDP growth has been weaker compared to New Zealand’s recent rebound, keeping AUD under pressure.

RBA’s Dovish Stance – The Reserve Bank of Australia (RBA) has maintained a cautious stance, signaling that rate hikes may be over, unlike the Reserve Bank of New Zealand (RBNZ), which remains relatively hawkish.

Housing Market & Consumer Spending Concerns – High mortgage rates and falling household savings are dampening Australian consumer confidence.

Commodities & China’s Slowdown – While New Zealand benefits from dairy exports, Australia’s reliance on iron ore and coal exports to China has made the AUD vulnerable to China’s economic struggles.

Yield Differentials – New Zealand’s higher interest rates (5.50%) compared to Australia’s (4.35%) have made the NZD a more attractive carry trade option.

4-Hour

The Aussie Dollar is shaken after a fall on employment. Despite Dollar weakness, AUD is trying to hold its ground.

As long as 0.63200 level remains intact, we could still see Australian Dollar to hold its ground for an upside potential.

If Aussie falls, 0.631 to 0.629 level could be a potential downside target.

NZDUSD

New Zealand Exits Recession: What’s Next for the Kiwi Dollar?

After months of economic contraction, New Zealand has officially exited recession, providing a much-needed boost to investor sentiment. The country’s latest GDP data showed positive growth, signaling a rebound from the technical recession seen in previous quarters. But what does this mean for the New Zealand dollar (NZD) and the broader economic outlook?

Key Factors Behind the Recovery

Stronger Consumer Spending – Increased household consumption has helped lift economic activity.

Resilient Labor Market – Unemployment remains low, supporting domestic demand.

Improved Business Confidence – Firms are gradually regaining optimism amid stabilizing conditions.

China’s Economic Outlook – As New Zealand’s largest trade partner, signs of recovery in China have supported export demand.

Impact on the New Zealand Dollar

Kiwi Dollar Strength: A stronger economy fuels expectations that the Reserve Bank of New Zealand (RBNZ) might delay rate cuts, supporting NZD.

Inflation Still a Concern: While the economy is recovering, inflation pressures persist, which could keep the RBNZ cautious.

Daily

Daily is still going strong and currently testing the previous turned support.

4-Hour

Upside potential remains intact as long as the price holds above the range low targeting the top of the range for momentum catalyst.

EURUSD

Euro Finds Temporary Relief as Geopolitical Tensions Ease

The proposed 30-day ceasefire between Russia and Ukraine brings short-term stability to the eurozone, easing risk sentiment and supporting investor confidence. With energy disruptions subsiding, inflationary pressures could ease, allowing the ECB to take a more measured approach to policy. However, if Russia regroups for further aggression, uncertainty could return, keeping euro volatility in play.

EU Enforces Digital Markets Act Against Tech Giants

The European Commission has initiated enforcement actions under the Digital Markets Act (DMA) against major tech companies, including Google and Apple. Google is accused of favoring its own services in search results and restricting competitor access on its Play Store, while Apple has been ordered to open its iOS operating system to rival developers. Non-compliance could result in fines up to 20% of global revenue. These measures aim to promote fair competition within the digital market. The enforcement has heightened tensions with the U.S., with President Donald Trump threatening retaliatory tariffs, viewing the EU's actions as unfairly targeting American companies.

4-Hour

Euro is still in-tact and held its ground despite the short term rally of the US dollar. A break of the 1.091 level could be trigger for EUR to go to the upside.

Right now, we are still hovering near the 50 MA and looking for a sustained support.

GBPUSD

4-Hour

Pound continues to gain traction with imminent new highs on the horizon.

Potential pullback levels for long oppotunity could be set at 1.29762 - 1.29938.

Possible scenarios from our previous post are still intact: https://acy.com/en/market-news/market-analysis/trumpcession-dollar-markets-lows-j-o-03192025-131825/

EURGBP: Range-Bound Market

Daily

4-Hour

EURGBP is still on a bullish zone of the overall range with signs strength on EUR. Currently, we are also on a range-bound market on 4-hour.

A break of the high could give EUR a push to the upside.

USDCAD

Daily

Loonie remains laggard and we are not seeing strength yet for a confirmed direction.

Wait for:

1. News Catalyst - Tariffs
2. Break of Support

USDCHF

Daily

Swiss is on an imminent breakdown with further downside ahead. We are not seeing any signs of recovery.

4-Hour

4-Hour suggests that we are still in a strong downtrend with:

1. Moving averages acting as resistance.
2. Fair Value Gap remains intact.

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.