Fed To Hold Rates Through To 2023

Admin, September 17th, 2020

  • The Fed held rates as expected but divulged that rates will remain around current levels through to 2023. In the press conference Jerome Powell said economic output remains well below pre-Covid levels and that a full economic recovery is unlikely until people feel safe to be active. On inflation targeting the Fed will aim to let inflation rise “slightly above 2% for some time”.
  • It was a mixed reaction from the USD, with the dollar index closing flat, USD/JPY breaking below 105 whilst falling against CHF, EUR and GBP.
  • US equities closed lower with Nasdaq 100 (USTEC) and the S&P 500 (US500) falling -1.7% and -0.5% respectively.

 

  • Australian employment: AUD/USD remains unchanged following the FOMC meeting, but a stronger-than-expected employment report could see it break to a 2-week high. The issue with employment reports at present is that Australia’s “jobkeeper” support package is making unemployment lower than it otherwise would be, and will continue to do so until 28th March 2021.
  • BOJ rate decision: No policy change expected.
  • BOE rate decision: No policy change expected. However they may signal more stimulus next month, so keep an eye on GBP pairs and the FTSE 100 (UK100) for any market reaction. They tend to share an inverted correlation, so a stronger pound could see FTSE weaken (and visa versa)

 

EUR/JPY: Firm Close Beneath Key Support

  • The close below 124.30 confirms the topping pattern we highlighted yesterday, which projects an approximate target around 121.80.
  • Given the strong move, a minor correction high could be expected. This could allow for bears to fade into resistance around prior support (124.30/43) or the resistance zone around 125.00.
  • Bias remains bearish below 125. If another lower high materialises, bears can target support around 123.00.

 

USD/CHF: Back Above the Monthly Pivot

  • A series of low wicks on the daily chat suggest buying pressure at the lows, and bullish momentum has taken prices back above the monthly pivot point.
  • The stochastic oscillator has suggested a buy signal with a close above its signal line.
  • Bias remains bullish above 0.9050 and bulls can target the monthly R1 level around 0.9180.
  • A close below the monthly pivot places it onto the backburner. A break beneath 0.9050 removes it from the watchlist.

 

DJIA (US30): Potential Counter-Trend Swing Trade

  • The initial decline from the 29196.23 high broke a prior swing low to warn of a change in trend.
  • A bearish hammer and bearish pinbar have formed on the daily chary to suggest a lower high is forming.
  • Bearish swing traders could take a break beneath 27,936 as a suggestion that a leg lower is underway and target the lows around 27,200.
  • A break above this week’s high invalidates the bearish swing trade setup.
  • As this is counter to the dominant, bullish trend, it carries extra risk. It is therefor may not be setup to ‘outstay your welcome’ and look for a large move.

 

Watchlist Update:

GBP/JPY: Continues to consolidate in a tight range. A break below 135.35 assumes bearish trend continuation and brings 134.00 into focus. A break above 136.62 assumes a deeper correction against the bearish trend.

USD/CNH: Bias remains bearish and momentum could now target the 0.6700 handle.

Gold: Bias remains bullish above 1936.89. However, two bearish hammers have closed back below the sloping resistance, so there is potential for another dip lower.

CHF/JPY: Initial target near the 115.14 low has been reached. Whilst there’s potential for a bounce form current levels, the bias remains bearish below the 117.30 hammer high.

CAD/CHF: Waiting for retracement higher to fade into.

NZD/CHF: Approaching initial target around the 0.6148 high. Bias remains bullish above yesterday’s low (0.6090).

Brent: Removed from watchlist. We were waiting for evidence of a top for a bearish signal but bullish momentum is now too strong.

EUR/CAD: Removed from watchlist. Yesterday’s bearish candle is too volatile for a buy-the-dip strategy.

 

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