Fed officials push back against policy pivot narrative
Fed Offical's Comments
There were some notable comments from Fed officials yesterday:
1. Chicago Fed President Charles Evans is looking for 50bps in September and 25 bps until Q2 2023.
2. San Francisco Fed President Mary Daly said "we are resolute" in lowering inflation to the 2% target.
3. Cleveland Fed President Loretta Mester said the central bank would need several months of evidence that inflation has peaked before the rate hiking cycle ends.
These comments come after our previous article suggested similarly.
US 10-Yr Treasury
Source: www.tradinglive.com
The US10Y has pulled back since reaching its cycle high dated June 14 of 3.49%. However, the instrument's pattern may be a continuation flag, suggesting higher yields. To this end, we are watching for four specific developments:
1. A bullish cross of the trend-following EMAs (top blue ellipse).
2. The bullish stochastic to cross positively and hold (lower blue ellipse).
3. The RSI to move above 50 (red arrow), representing the oscillator's bullish side.
4. The stochastic reaching the 80 levels and maintaining (blue arrow).
Risk Premium Adjustment
If these four conditions trigger, it will suggest that the risk premium is adjusting upwards. However, this adjustment will pressure present values, and risk markets will likely revise downwards. As such, we continue to monitor.
Russell Shor
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.