FBS

GBP/USD Market sentiment on the H4 is bullish. Cable is consolidating around $1.6380 after having jumped to $1.6485 post the Fed’s announcement. We remain bullish for the pair as long as it holds above $1.6320. The cable broke above the bearish channel. H4 MACD histogram rose into the positive territory (bullish sign). Cable rose above the 100- and 55- period MAs. Ichimoku Cloud is also giving out bullish signals. Support: $1.6340, $1.6300, $1.6230 (38.2% Fibo), $1.6215 Resistance: $1.6435, $1.6465, $1.6500 Chart. H4 GBP/USD Upcoming events: GBP - 9:30 GMT – Retails sales USD - 13:30 GMT - Unemployment Claims USD - 15:00 GMT - Existing Home Sales USD - 15:00 GMT - Philly Fed Manufacturing Index USD - 15:00 GMT - CB Leading Index

Technicals for majors EUR/USD EUR/USD breached support at $1.3705 on the news that the Fed will taper QE. The pair fell below 55-period MA and is trading in the area of the100-period one. The lines went from rising to the horizontal state. The prices are at the lower edge of the Ichimoku Cloud ($1.3666) which is currently providing support. Failure here will be a bearish signal. The bullish Cloud itself has dramatically narrowed. MACD went to the negative territory. RSI is currently signaling oversold. Support: $1.3666, $1.3648, $1.3625 and $1.3575 Resistance: $1.3705, $1.3740/50, $1.3790 Chart. H4 EUR/USD Upcoming events: EUR - 9:00 GMT - Current Account EUR - All Day - European Council meeting (banking union discussion) USD - 13:30 GMT - Unemployment Claims USD - 15:00 GMT - Existing Home Sales USD - 15:00 GMT - Philly Fed Manufacturing Index USD - 15:00 GMT - CB Leading Index

Fed announced $10 bln tapering Farewell surprise from Mr. Bernanke ) The Federal Reserve announced it would cut its monthly bond purchases in January to $75 billion from $85 billion, taking the first step toward unwinding the unprecedented monetary stimulus. “In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the committee decided to modestly reduce the pace” purchases, the Federal Open Market Committee said today. The interest rate will remain at record lows at least before the unemployment falls below 6.5%. The Fed has also revised its economic forecasts to the upside.

Key currency options (Dec. 19) Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT). Here are the key options expiring today: EUR/USD: $1.3500 (large), $1.3530, $1.3540, $1.3670, $1.3770, $1.3780; GBP/USD: $1.6400; USD/JPY: 103.00 (large), 103.50, 103.70; AUD/USD: $0.8710 (large); $0.8900 (large); $0.8950, $0.9050 (large); USD/CAD: 1.0595.

Dec. 19: Asian session US dollar gave back some of the gains it made yesterday as the Fed said it would start tapering QE. USD/JPY corrected a bit from more than 5-year high at 104.36, but is still trading above 104.00. Japanese Nikkei share average jumped by 1.5% this morning. Data on Japan buying foreign bonds showed continued outflow of money from Japan. Australian and New Zealand dollars came under pressure as Fed announced tapering. AUD/USD fell to$0.8820, its lowest level since August 2010, but has recovered some ground later. The pair sits at the $0.8850 August 2013 lows as of writing. NZD/USD fell to $0.8175 despite the better-than-expected New Zealand GDP. NZ economy rose by 1.4% q/q in Q3 vs. expected +1.1% and prior +0.3%. EUR/USD slipped to $1.3648. GBP/USD is trading in the $1.6370 area after peaking to $1.6484 yesterday.

GBP/USD: how long will the rally last? Kira Iukhtenko, FX BAZOOKA analyst As we expected yesterday, the cable met buyers at the lower boundary of the bearish channel at $1.6230 (this is also the 38.2% Fibo retracement from the $1.5850/6450 rally). On Wednesday GBP/USD jumped to $1.6365 (61.8% Fibo of the recent decline), inspired by the upbeat UK employment figures. Jobless claims in Great Britain contracted by 36.7K in November (forecast: -35.2K; prior revised up to -42.8K). Unemployment rate fell from 7.6% to 7.4%, coming closer to the BoE 7.0% target. BoE meeting minutes brought nothing new except for the words that “further substantial appreciation” of GBP may hurt the economic recovery. However, the market didn’t pay too much attention on that. The question now arises of whether the GBP rally will survive the Fed’s meeting or not. If the Fed tapers and pushes the greenback up, cable can depreciate. However, the market needs too close below $1.6230/00 area to confirm the top at $1.6465. If the Fed disappoints with QE reduction, we can see a rise towards our initial target of $1.6600 in the medium term.

MS: trading on the FOMC Analysts at Morgan Stanley developed scenarios of the FOMC meeting results and supplied them by the suitable course of actions for traders: Scenario 1: No major policy changes Actions: Initially sell USD against most currencies; buy risky currencies vs. JPY. Then start looking for lower levels to buy USD as the QE tapering should take place early next year. Scenario 2: Some tapering without guidance Actions: Buy USD vs. risky currencies; cautious about USD/JPY longs as yen will likely strengthen in the risk-off environment. Scenario 3: Forward guidance Actions: The stronger the forward guidance is, the better performance MS would expect from currencies which are highly sensitive to rate spreads and less sensitive to risk appetite. If we get forward guidance + tapering, GBP and CAD would outperform on the crosses.

Fed announced $10 bln tapering (Farewell surprise from Mr. Bernanke ) The Federal Reserve announced it will cut its monthly bond purchases in January to $75 billion from $85 billion, taking the first step toward unwinding the unprecedented monetary stimulus. “In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the committee decided to modestly reduce the pace” purchases, the Federal Open Market Committee said today. The interest rate will remain at record lows at least before the unemployment falls below 6.5%. The Fed has also revised its economic forecasts to the upside.

FBS operating schedule for Christmas and New Year holidays Kindly pay your attention to the trading schedule changes affected by Christmas and New Year holidays. Tuesday, 24 December 2013 – early trading close at 19:00 terminal time (GMT+2). Wednesday, 25 December 2013 – trading is closed. Thursday, 26 December 2013 – trading opening at 9:00 terminal time (GMT+2). Tuesday, 31 December 2013 – early trading close at 19:00 terminal time (GMT+2). Wednesday, 1 January 2014 – trading is closed. Thursday, 2 January 2014 – trading opening at 9:00 terminal time (GMT+2). During the above mentioned period there might occur some changes in trading conditions and margin requirements due to traditionally lower liquidity and higher volatility of the market. FBS wishes everyone Merry Christmas and Happy New Year! May this festive season bring you new achievements, happiness and success!