Fed Tapers, Dollar Ends Higher

After months of speculation Bernanke finally delivered a taper with a $10 bn reduction in monthly purchases. The market reaction was completely disjointed but eventually dollar strength took hold, leaving impressive technical patterns in EUR/USD and USD/JPY. The pound held onto the best performance of the day after the earlier jobs report while the yen lagged badly. Early in Asia-Pacific trading, New Zealand GDP beat expectations.

This is the beginning of the end. The Fed finally took its foot off the gas pedal, only slightly but it's a powerful signal that the era of money printing will end one day.The FOMC cut monthly asset purchases by $10 billion a month to $75 billion in a somewhat surprising decision. The Fed acknowledged to stronger economy and Bernanke said FOMC members expect continued improvement in the jobs market.

For the doves, the Fed strengthened forward guidance saying it won't tighten until unemployment falls 'well below' 6.5%. Bernanke also emphasized risks from disinflation but opted not to draw a line under prices as some analysts had expected.

Overall, it's probably the most hawkish surprise ever from the Bernanke Fed. That isn't saying much but after a wild hour of nonsensical trading the US dollar finally found a footing and made substantial gains.

The most important move was against the yen. USD/JPY erased three days of declines and surged more than 150 pips from the lows to a fresh cycle high at 104.36 and the first close above the May high.

EUR/USD is less straightforward but the rise to a fresh two month high followed by a 125 pip drop to 1.3675 forms a bearish engulfing candle and a potential double top.

Another spot of weakness was AUD/USD as it slumped below the August bottom to a cycle low and to 0.8820. What might be different about the Aussie is that it's headed for a ninth-consecutive week of declines so some kind of bounce is due.Then again, the New Zealand dollar had every reason to bounce after the Q3 GDP beat expectations with a 1.4% q/q rise compared to 1.1% expected. NZD/USD climbed to 0.8255 but quickly slumped back to 0.8193 in a sign of USD dollar strength.

The rest of the Asia-Pacific calendar is quiet.