The Federal Reserve’s meeting minutes on Wednesday were pretty much a non-event, with most of it a reiteration of Janet Yellen’s press conference last month.
With nothing new from the FOMC, investors listened to Charlie Evans, a voting member of the Federal Reserve, who thinks that rates aren’t likely to rise until 2016 at the earliest in the US. This isn’t much of a surprise since they’ve already mentioned that they’re being “patient” with potential monetary policy adjustments.
However it goes against the current market forecast of a September hike and Mr Evans believes that this is warranted because inflation won’t be back to the 2% goal until at least 2018, with a premature rate hike pushing that back even further and risking economic stability.
Other takeaways from yesterday’s FOMC meeting:
Inflation Remains a Concern
What’s keeping the Fed cautious for now is the fact that inflationary pressures are weakening once more, thanks to falling oil prices. According to the minutes, FOMC members would like to see core inflation move closer to their 2% target before discussing policy changes.
An interesting piece from Market Watch says that the strength of the Dollar could turn into a ‘hurricane path of destruction’ if it remains strong, or worse, continues to strengthen.The argument is that those that borrowed heavily in Dollars to finance oil projects when oil was around $100 per barrel now have the double whammy of low oil revenues and much higher than expected debt repayments. This could ultimately hurt the US economy if the global picture deteriorates because of it and, as such, they argue that the Fed will need to start talking the Dollar down.
Bank of American has said that WTI and Brent Crude could have to fall as low as $35 and $40 respectively, in order to convince Opec countries to cut supply and prices to rise. The market was at $48 and $51 yesterday, respectively, so still some way to go.
Confidence in domestic economy
Grim inflation outlook aside, the FOMC minutes still sounded relatively upbeat with its economic assessment and outlook, with policymakers expressing confidence in domestic performance. Even as other major economies are facing challenges, Fed head Yellen assured that external threats are being balanced by positive developments locally.
Intraday Forex Technical Levels
EUR/USD 4-hour: Reached our target.
Invest Diva positioning: Short positions below 1.1782 with targets at 1.1663 and 1.1536 in extension.
Technical reasons why: The pair reached our bearish target at 1.1782 and continues to drop below the Ichimoku’s cloud. The RSI also keeps moving below the oversold zone.
Alternative Scenario: Above 1.1782 look for further upside toward 1.18750 and 1.9700.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.1663 | 1.1782 | 1.1875 |
| 1.1536 | 1.1970 |
GBP/USD 4-hour: Downtrend prevails.
Invest Diva positioning: Short positions below 1.5173 with targets at 1.4954 and 1.4835 in extension.
Technical reasons why: The pair continues to move down to our bearish target below the Ichimoku’s cloud. The RSI keeps moving below the oversold zone.
Alternative Scenario: Above 1.5173 look for further upside toward 1.5273 and 1.5375.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.4954 | 1.5173 | 1.5273 |
| 1.4835 | 1.5375 |
USD/CHF 4-hour: Uptrend prevails.
Invest Diva positioning: Long positions above 1.0162 with targets at 1.0307 and 1.0426 in extension.
Technical reasons why: The pair continues to move up to our bullish target above the Ichimoku’s cloud. The RSI keeps moving above the overbought zone.
Alternative Scenario: Below 1.0162 look for further downside towards 1.0052 and 0.9963.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.0052 | 1.0162 | 1.0426 |
| 0.9963 | 1.0307 |
USD/JPY 4-hour: Testing the Ichimoku’s cloud.
Invest Diva positioning: Long positions above 119.35 with targets at 120.63 and 121.83 in extension.
Technical reasons why: The pair is consolidating while testing the Ichimoku’s cloud above our pivot level at 119.35. The RSI is around the neutrality area.
Alternative Scenario: Below 119.35 look for further downside toward 117.98 and 115.59.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 117.98 | 119.35 | 120.63 |
| 115.59 | 121.83 |
NZD/USD 4-hour: Teasing the key resistance level.
Invest Diva positioning: Long positions above 0.7834 with targets at 0.7887 at 0.7973 in extension.
Technical reasons why: The pair is teasing the key resistance level at 0.7834 above the Ichimoku’s cloud. A break above this level would give a further up-move. The RSI is above the neutrality area.
Alternative Scenario: Below 0.7834 look for further downside towards 0.7747 and 0.7694.
Where I’m setting my stops and limits:
Support Levels Turning Point Resistance Levels
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.7747 | 0.7834 | 0.7973 |
| 0.7694 | 0.7887 |
USD/CAD 4-hour: Consolidating above the key resistance level.
Invest Diva positioning: Long positions above 1.1795 with targets at 1.1880 at 1.1996 in extension.
Technical reasons why: The pair broke above the key resistance level at 1.1795 and is consolidating above this level above the Ichimoku’s cloud. The RSI is above the neutrality area.
Alternative Scenario: Below 1.1795 look for further downside towards 1.1665 and 1.1600.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.1665 | 1.1795 | 1.1996 |
| 1.1600 | 1.1880 |
#1 Best Selling Author. Helping you accelerate your retirement with Triple Compounding™ Former engineer on a mission to help 1 million households take control of their finances. Founder & CEO of Invest Diva.
