Ellison EUR/USD Morning analysis 20/06
There are no new events from a reactive standpoint or headlines and minimal change in price on EUR/USD. So I have the same analysis, sentiment, focus points and trade ideas as my previous morning analysis.
Fundamental Lesson - Consumer Price Index
Key points:
- Disinflation in Core CPI and headline reading.
- FED 'skips' rate hike in June FOMC meeting and retains data dependent.
- FED projects inflation to remain stubborn above 2% until 2025.
- FED projects Unemployment Rate to be 4.1% by the end of 2023.
- Fed projects 2 additional basis point rate hikes to come.
On June 13th, the CPI got released showing disinflation in the year-over-year readings. This led to the FED developing a "skip, not a pause" narrative regarding the US monetary policy, as any more interest rate increases would seem excessive given that the current interest rate seems to be working in bringing down Inflation.
The year-over-year CPI decreased from 4.9% to 4%, while the Core Inflation remained stubborn and only decreased from 5.5% to 5.3%. Core CPI is however more significant as it removes the volatility of energy prices, food prices and financial investments from the calculation, and gives a deeper look into the Economic position of a country
Historically, inflation has decreased significantly once the Fed Funds Rate exceeds CPI. Currently, the FFR is above CPI and almost above Core CPI. They have now almost reached this first checkpoint but this potentially leaves the need for another rate hike. The Fed can now take its time and observe how the data react to prior rate hikes before making any descisions.
The Fed projected the Fed Funds Rate to be 5.6% by the end of 2023, signaling 2 more 25 basis point rate hikes by the end of the year.
Fundamental Lesson - Consumer Price Index
Key points:
- Disinflation in Core CPI and headline reading.
- FED 'skips' rate hike in June FOMC meeting and retains data dependent.
- FED projects inflation to remain stubborn above 2% until 2025.
- FED projects Unemployment Rate to be 4.1% by the end of 2023.
- Fed projects 2 additional basis point rate hikes to come.
On June 13th, the CPI got released showing disinflation in the year-over-year readings. This led to the FED developing a "skip, not a pause" narrative regarding the US monetary policy, as any more interest rate increases would seem excessive given that the current interest rate seems to be working in bringing down Inflation.
The year-over-year CPI decreased from 4.9% to 4%, while the Core Inflation remained stubborn and only decreased from 5.5% to 5.3%. Core CPI is however more significant as it removes the volatility of energy prices, food prices and financial investments from the calculation, and gives a deeper look into the Economic position of a country
Historically, inflation has decreased significantly once the Fed Funds Rate exceeds CPI. Currently, the FFR is above CPI and almost above Core CPI. They have now almost reached this first checkpoint but this potentially leaves the need for another rate hike. The Fed can now take its time and observe how the data react to prior rate hikes before making any descisions.
The Fed projected the Fed Funds Rate to be 5.6% by the end of 2023, signaling 2 more 25 basis point rate hikes by the end of the year.
Comment:
An example of a smarter trade than the one I took, with confirmations on the 5m and an SL above the high where the trade would be invalidated.
Comment:
Now I don't usually take trades against my sentiment, but this looked great and I was expecting this or a liquidity grab in the Early London session before coming back down.