The US dollar reasserted itself Thursday as it cruised to gains against the yen and pound while beating up on commodity FX. The euro kept pace and was the top performer while CHF lagged. A full slate of tier 1 Japanese data is due next.. After the last of our 2 AUDJPY shorts hit its final target of 91.40, totalling +230 pips, we issue 1 trade on USDJPY with 3 charts. Full detail found in the latest Premium Insights.

The Fed didn't send any particularly strong signals yesterday but the US dollar proved that the status quo continues to be enough. Initial jobless claims fell to 265K compared to 300K expected and even though it was probably skewed by a US holiday it added to the USD bid.

USD/JPY pushed toward the topside of the recent range, hitting 118.48 in a half-cent rise that was aided by a better mood in stocks. The euro may have benefitted from some long-term position squaring. The German inflation data was very soft and it couldn't prompt more selling. It's getting tougher to see a near-term catalyst for EUR/USD weakness and that may have been the catalyst for profit taking, maybe even more so in EUR/GBP shorts.

The real losers on the day were the commodity currencies. An early dip in oil was all USD/CAD needed to break a big figure for the second day as it cruised through 1.26 and then ripped to 1.2670.

The Australian dollar has completely cast aside the CPI data. Terry McCrann, the RBA watcher at the Herald-Sun wrote that a cut is 'almost certain' on Tuesday and that added to the drop but McCrann's record is dismal and traders may be too focused on central bank surprises elsewhere.

The focus will be on the yen in the hours ahead as the monthly data highlights hit with jobs and CPI due at 2330 GMT, followed by industrial production 20 minutes later. By far, the Dec CPI report is the most important and it's expected up 2.1% y/y ex-food and energy. Tokyo CPI for Jan is expected up 1.8% ex-food and energy. A miss might not cause a large reaction but a soft reading could start up the BOJ conversation once again, especially chatter about negative rates.

The Fed touched on softer short-term inflation but better growth in a statement that had something for everything but nothing definitive or surprising. On the day, the Australian dollar was the top performer while the loonie lagged to a fresh 5-year low. The RBNZ followed up the Fed decision by shifting to neutral and flexing its jawbone.  Our Premium subscribers who got on those 2 Premium shorts in AUDJPY, issued on Monday are realizing 200 pips on the 1st trade and 130 pips on the 2nd trade, which was filled after last night's release of higher than expected Aussie CPI temporary lifted the pair.

The Fed upgraded its economic assessment to 'solid' from 'moderate' but lowered its view on inflation, saying it has declined and may decline further. The key caveat was that officials remain confident in medium-term inflation which is a signal they believe low inflation is a one-off effect due to oil and that stronger inflation pressures are in the pipeline because of jobs growth.

The market wavered after the release. In general, the US dollar climbed against the commodity currencies while slipping against the yen and holding against EUR and GBP. The Fed is in 'wait and see' mode so we will await economic data and Fed comments in the coming weeks to see if the 'patient' view on liftoff will remain.

The Fed refrained from mentioning the US dollar as a source of downward pressure on inflation but if corporations continue to refer to FX headwinds, that may change in March. It's also something we'll look for in the FOMC minutes.

The Fed was followed by the RBNZ an hour later. Governor Wheeler said rates will be on hold for longer and that the next move could be higher or lower and with that he completely removed the hawkish bias. He called the NZD rate unjustifiably, unsustainably high. It's fresh rhetoric but part of a long jawboning campaign that's been sprinkled with intervention. His comments had the desired effect and sent NZD down 60 pips to a fresh cycle low.

The RBNZ comments helped to drag down the Australian dollar and left it nearly unchanged on the day despite the higher CPI reading. That's a bearish signal.

Up next, the focus shifts to Japan with retail sales data due at 2350 GMT. The market is looking for a 0.9% y/y rise but it's unlikely to move USD/JPY, which is testing the downside of its recent range at 117.40.

USD rallied against all FX with the exception of the Japanese yen-- the overall winner following today's release of the FOMC statement, which can be best summed up as less dovish than expected, or slightly more hawkish than anticipated. The resulting declines in the stock market – 195 pt loss in the Dow meant a 2.75% decline in two days, which is the biggest back-to back drop since February 2014. Full charts & analysis.

USD rallied against all FX with the exception of the Japanese yen-- the overall winner following today's release of the FOMC statement, which can be best summed up as less dovish than expected, or slightly more hawkish than anticipated. The resulting declines in the stock market – 195 pt loss in the Dow meant a 2.75% decline in two days, which is the biggest back-to back drop since February 2014. Full charts & analysis.

Separate economic data points on Tuesday left a wildly different impression of the US economy as we count down to the FOMC. The euro snapped back on short covering and was the top performer while USD lagged. The Australian dollar was also an underperformer ahead of a critical CPI report. 1 of 2 Premium AUDJPY trades from last night has been filled and is in the money, while both NZDCAD remain in progress. 

The Fed is highly unlikely to remove a commitment to be patient before raising rates in its decision on Wednesday. Policymakers are looking for clarity on the economy but the picture is growing murkier. Nevermind the divergence between the US and other economies, it's impossible to get a clear idea of the domestic economy.

Dec durable goods orders fell 3.4% in the fifth consecutive flat or negative reading. It was compounded by substantial negative revisions. Details were also weak. Capital goods orders non-defense ex-air fell 0.6% compared to +0.9% expected; also with a big negative revision.

That data point sent a shudder through the US dollar and market participants are increasingly talking about no Fed hikes this year. Then just 90 minutes later reports on consumer confidence and new home sales both smashed expectations to the highest levels since the crisis.

The Fed won't want to pick sides and that ensures no substantial changes in guidance but other factors could weigh on the dollar. The Fed will have noticed falling corporate earnings due to the strong dollar and low inflation because of commodities. That could lead Yellen to downgrade inflation forecasts and note the dollar – both could cause a squeeze on USD.

But first it's the Australian dollar in focus with the 0030 GMT release of Q4 GDP. This is a major report ahead of the Feb RBA decision. The market is divided about the chance of a rate cut and this will likely cast the deciding vote. Overall CPI is expected up 1.8% y/y but the trimmed mean is key; it's expected up 2.2% y/y.