EURUSD falls on hawkish comments from Fed
Macroeconomic overview
New York Fed President William Dudley, among the most influential U.S. central bankers, said that the case for tightening monetary policy "has become a lot more compelling" since the election of President Donald Trump and a Republican-controlled Congress. He said we have seen a "very large" rise in household and business confidence and "very buoyant" financial markets since the November election, "and we have the expectation that fiscal policy will probably move in a more stimulative direction."
John Williams, president of the San Francisco Fed, said that with the economy at full employment, inflation headed higher, and upside risks from potential tax cuts waiting in the wings, "I personally don’t see any need to delay" raising rates. Williams said that raising rates in March, rather than waiting until June, gives the Fed room to raise rates this year more than the three times. Williams is not a voter this year on policy, but his views are seen as influential among his colleagues.
The comments on Tuesday included remarks from Philadelphia Fed President Patrick Harker calling for three rate hikes this year.
A counterpoint came Tuesday evening from St. Louis Federal Reserve President James Bullard, who feels only a single rate hike is needed this year and argued there is no need to anticipate the possible impact of tax and spending plans that are still not fleshed out and may take months to pass Congress.
Interest rate futures implied traders saw a nearly a 57% chance the Fed would raise rates at its March 14-15 meeting, up from roughly 31% late on Monday. Market expectations are likely to be shaped further this week when Fed Governor Lael Brainard speaks on Wednesday in Boston and when Fed Chair Janet Yellen updates her views on the economy in a Chicago address on Friday.
In remarks to a joint session of Congress, U.S. President Donald Trump offered little detail about planned tax cuts or new infrastructure spending beyond the broad strokes he offered during the election campaign, leaving policymakers with little to add to their analysis. The USD would have been sold on disappointment after Trump’s speech but hawkish comments from the Fed overwhelmed that.
Technical analysis
Prices were rejected from above the cloud on Tuesday and closed back below. The next support level is February 22 low at 1.0494. A close below that level would open the way to 1.0451 (76.4% fibo of January-February rise).
Trading strategy
We stay sideways on this pair, as we think no position in justified from the risk/reward perspective. We should wait for Yellen’s comments on Friday. The EUR/USD is likely to drop to January low at 1.0342 in case of hawkish rhetoric. But if Yellen sounds dovish we should expect a strong recovery above 1.0700.
GrowthAces.com - Daily Forex Trading Strategies
New York Fed President William Dudley, among the most influential U.S. central bankers, said that the case for tightening monetary policy "has become a lot more compelling" since the election of President Donald Trump and a Republican-controlled Congress. He said we have seen a "very large" rise in household and business confidence and "very buoyant" financial markets since the November election, "and we have the expectation that fiscal policy will probably move in a more stimulative direction."
John Williams, president of the San Francisco Fed, said that with the economy at full employment, inflation headed higher, and upside risks from potential tax cuts waiting in the wings, "I personally don’t see any need to delay" raising rates. Williams said that raising rates in March, rather than waiting until June, gives the Fed room to raise rates this year more than the three times. Williams is not a voter this year on policy, but his views are seen as influential among his colleagues.
The comments on Tuesday included remarks from Philadelphia Fed President Patrick Harker calling for three rate hikes this year.
A counterpoint came Tuesday evening from St. Louis Federal Reserve President James Bullard, who feels only a single rate hike is needed this year and argued there is no need to anticipate the possible impact of tax and spending plans that are still not fleshed out and may take months to pass Congress.
Interest rate futures implied traders saw a nearly a 57% chance the Fed would raise rates at its March 14-15 meeting, up from roughly 31% late on Monday. Market expectations are likely to be shaped further this week when Fed Governor Lael Brainard speaks on Wednesday in Boston and when Fed Chair Janet Yellen updates her views on the economy in a Chicago address on Friday.
In remarks to a joint session of Congress, U.S. President Donald Trump offered little detail about planned tax cuts or new infrastructure spending beyond the broad strokes he offered during the election campaign, leaving policymakers with little to add to their analysis. The USD would have been sold on disappointment after Trump’s speech but hawkish comments from the Fed overwhelmed that.
Technical analysis
Prices were rejected from above the cloud on Tuesday and closed back below. The next support level is February 22 low at 1.0494. A close below that level would open the way to 1.0451 (76.4% fibo of January-February rise).
Trading strategy
We stay sideways on this pair, as we think no position in justified from the risk/reward perspective. We should wait for Yellen’s comments on Friday. The EUR/USD is likely to drop to January low at 1.0342 in case of hawkish rhetoric. But if Yellen sounds dovish we should expect a strong recovery above 1.0700.
GrowthAces.com - Daily Forex Trading Strategies
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