The Fed raised rated by 50bps to a target range of 4.25%-4.50%. Its tone was hawkish with the key takeaway that the Fed pushed back against a pivot. Fed chair Powell stated, "We think that we'll have to maintain a restrictive stance of policy for some time. Historical experience cautions strongly against prematurely loosening policy." The dot plots suggest a terminal rate of 5.1% in 2023, up from the 4.6% in September.
FXCM's USDOLLAR basket spiked on the news before settling, charting a long upper shadow (blue arrow). Notably, the hourly EMAs and the stochastic are in bullish mode (black ellipses). The greenback is showing signs of strength. However, the daily chart on the left shows that the dollar is still trading in its weak area between the lower blue and red bands. Dollar rallies may be targets. This is because US median CPI is likely at a turning point. The Fed may be behind the curve. A likely induced output gap means aggressive cuts in H2 2023 are a possibility.
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.