USDOLLAR bullish ahead of Wednesday’s Fed hike
On Wednesday, 21 Sept, at 6:00 pm GMT, the Fed will announce its hike in the Federal Funds Rate and release its FOMC statement. Thirty minutes later, the Fed Chair will hold the FOMC press conference. We expect a 75 bps increase to 3.25%. However, following the higher than expected CPI, the market has priced in a 20% probability for 100bps.
The current inflation tends to have a broad sticky element to it. This price resilience will likely concern the Fed until it shows disinflation. However, per the preliminary University of Michigan Inflation Expectations survey, consumer expectations moderated to 4.6% (4.8% - previous). Moreover, the pricing elements from last week's Empire State and Philly Fed Manufacturing Indexes indicate temperance. Therefore, 75bps seems to make more sense at this stage.
.png)
The USDOLLAR remains supported in this environment. The daily stochastic has just moved above 80. A solid momentum will be present if it holds in this area (green rectangle). The basket trades between the upper blue and red bands in its bullish channel. Moreover, the upper Bollinger has turned up. If the bottom red band follows, the greenback will have an upwards bias (base case scenario).
The stubborn inflation has hurt the Fed's credibility; therefore, aggressive action remains likely. As such, hawkish Fed communication will support our base case scenario.
Image by NikolayF.com from Pixabay
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.