If investors were hoping for a relief rally in the wake of Thursday’s FOMC decision to hold rates they didn’t get one, as stock markets turned tail and headed lower, while the US dollar, after initially getting hit hard, rebounded quite strongly. Bond yields on the other hand enjoyed no such rebound finishing lower on the week as markets priced out the prospect of an imminent rise in interest rates. Market reaction appears to range from confused to somewhat nonplussed as to why the Fed decided to step back from a rise in rates, and in some respects the messaging has been a little opaque in recent weeks. For that the Federal Reserve has only itself to blame, but the signs have been there for several weeks and Thursday’s decision really shouldn’t have been that much of a surprise. It appears that the FOMC appears to be acknowledging that times have changed considerably from the time when rates were last put up in 2006. Janet Yellen’s admission that “financial and international developments” are a clear acknowledgment of this new world order, along with the fact that there is no way they can be “reasonably confident that inflation will move back to its 2% objective over the medium term” Given the amount of US dollars printed since 2009 in response to the global financial crisis, the Federal Reserve is no longer just the US central bank, it is now the world’s central bank and the amount of US dollars that have found their way into emerging markets as a result of the Fed’s easing policy of the last few years is something they have to pay attention to. Weighing concerns about the slowdown in China and any ripple out effect, the strength of the US dollar adding to a deflationary environment, they couldn’t really do anything else, given virtually every other central bank in the world is in full easing mode. Markets should get a further insight later this week into the Chinese economy with the release of preliminary Caixin Manufacturing PMI data for September on Wednesday. In any case we are likely to get further grist to this particular mill with a host of Fed speakers this week including the Atlanta Fed's President Dennis Lockhart, who is due to speak later today and on another two occasions later this week. In early August he stated that the bar to not raising rates was a high one, and yet he chose not to dissent to last week's decision so it will be particularly interesting as to what caused him to keep in line, and not dissent like his Richmond Fed colleague Jeffrey Lacker. Fed chief Janet Yellen is also due to speak on Thursday. Over in Europe the Greek elections saw Alexis Tsipras returned to power with a much clearer result than had been initially expected, and with the help of the Independent Greeks will be able to govern with a clear majority, though turnout was poor at 55%, with voters not prepared to go back to the old discredited parties of the past, deciding to give Syriza a second crack of the whip, in the absence of any credible alternatives. Even with a renewed mandate and shorn of the more radical members of his party implementation risk of the new bailout program remains a key concern. EURUSD – after peaking at 1.1460 last week the euro turned tail, dropping back below 1.1380 and could well head back all the way to trend line support from the August lows at 1.1220, while we also have support at the 100 day MA at 1.1150. While above these support levels the risk remains for a move higher towards 1.1700. GBPUSD – despite making a new 3 week high at 1.5660 the pound dropped back sharply on Friday pushing back below the 1.5570 area, and could well head back towards the 1.5470/80 area. We still remain on course for the August highs at 1.5820, but could slip back towards the lows last week at the 1.5330 area. EURGBP – still trading in the broad triangular consolidation with resistance now at 0.7360 and support at 0.7250. A break through 0.7400 has the potential to target a move to 0.7500. Below 0.7230 suggests a return to 0.7180. USDJPY – trading in a broad triangular consolidation with triangle line resistance at 121.00, and support at the 119.15 area. The US dollar still looks vulnerable to a return to the 116.20 area seen a few weeks ago, but for now appears to be range trading between 118.50 and 121.50. CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.