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Kathy Lien, Managing Director Of FX Strategy For BK Asset Management
Daily FX Market Roundup Sept 17, 2019
"For the second time this year, the Federal Reserve lowered interest rates by 25bp to a range of 1.75% to 2%. This widely anticipated move failed to hurt the dollar, which ended the NY session up against all major currencies. Today’s move by the Fed was a hawkish hike where two members voted against easing. To everyone’s disappointment, Fed Chairman Jerome Powell provided limited insight to future policy changes. According to the central bank, the labor market and household spending is strong, job gains are solid and economic growth is moderate. However exports weakened and there’s been additional weakness abroad but these exogenous risks were not enough for FOMC voters George and Rosengren to get on board with easing. According to the dot plot, Fed officials are divided on whether additional action is needed. Five members did not favor a cut today, five approved of the cut but see no more easing this year and seven see one more cut. This divisiveness is the main reason why Powell said the Fed is not on a preset course, is highly data dependent and will look at what’s needed carefully on a meeting-by-meeting basis."
"Back in July, the BoE lowered their GDP forecast for 2019 and 2020 and raised their inflation forecasts. Their projections did not include the possibility of no-deal and is based on the central bank lowering interest rates 25bp by early 2020. According to the central bank, there’s a lot of uncertainty, which could lead to a wide range of paths but if their forecast is met and a smooth Brexit occurs, gradual rate hikes could be necessary. Governor Carney’s comments were not as upbeat – he acknowledged that the chance of a no-deal Brexit has risen, felt that financial conditions remain volatile and warned that trade tensions have a larger-than-expected impact on the UK economy. As a result, he felt that underlying growth is now below potential with investment likely to fall further in the third quarter. Since that meeting, we’ve seen a tinge more deterioration than improvement in the UK economy. Retail sales growth slowed, inflationary pressures eased and manufacturing activity contracted at a faster pace. With that said, wages, services and manufacturing activity are up. In all likelihood, the BoE rate decision could be a nonevent for the currency"
Given this optimism on the USD and more uncertainty for GBP, "Brexit" and signs of a detoriating economy. Im predicting bullish exhaustion if price maintains below Psych Level 1.25500 , which could have a bear trap wicking towards 1.25800. Recent Price shows possible supply zone towards 88.6 FIB Level making it possible for a dump towards the London Sessions.
Kathy Lien, Managing Director Of FX Strategy For BK Asset Management
Daily FX Market Roundup Sept 17, 2019
"For the second time this year, the Federal Reserve lowered interest rates by 25bp to a range of 1.75% to 2%. This widely anticipated move failed to hurt the dollar, which ended the NY session up against all major currencies. Today’s move by the Fed was a hawkish hike where two members voted against easing. To everyone’s disappointment, Fed Chairman Jerome Powell provided limited insight to future policy changes. According to the central bank, the labor market and household spending is strong, job gains are solid and economic growth is moderate. However exports weakened and there’s been additional weakness abroad but these exogenous risks were not enough for FOMC voters George and Rosengren to get on board with easing. According to the dot plot, Fed officials are divided on whether additional action is needed. Five members did not favor a cut today, five approved of the cut but see no more easing this year and seven see one more cut. This divisiveness is the main reason why Powell said the Fed is not on a preset course, is highly data dependent and will look at what’s needed carefully on a meeting-by-meeting basis."
"Back in July, the BoE lowered their GDP forecast for 2019 and 2020 and raised their inflation forecasts. Their projections did not include the possibility of no-deal and is based on the central bank lowering interest rates 25bp by early 2020. According to the central bank, there’s a lot of uncertainty, which could lead to a wide range of paths but if their forecast is met and a smooth Brexit occurs, gradual rate hikes could be necessary. Governor Carney’s comments were not as upbeat – he acknowledged that the chance of a no-deal Brexit has risen, felt that financial conditions remain volatile and warned that trade tensions have a larger-than-expected impact on the UK economy. As a result, he felt that underlying growth is now below potential with investment likely to fall further in the third quarter. Since that meeting, we’ve seen a tinge more deterioration than improvement in the UK economy. Retail sales growth slowed, inflationary pressures eased and manufacturing activity contracted at a faster pace. With that said, wages, services and manufacturing activity are up. In all likelihood, the BoE rate decision could be a nonevent for the currency"
Given this optimism on the USD and more uncertainty for GBP, "Brexit" and signs of a detoriating economy. Im predicting bullish exhaustion if price maintains below Psych Level 1.25500 , which could have a bear trap wicking towards 1.25800. Recent Price shows possible supply zone towards 88.6 FIB Level making it possible for a dump towards the London Sessions.