Dollar Rips on FOMC Minutes, but Bremain Keeps Pound Top

May 19, 2016

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Dollar Rips on FOMC Minutes:
Is the Fed’s June Meeting ‘In Play’? Well, this morning’s FOMC Meeting Minutes say yes sir!

Last night’s FOMC Minutes suggest officials in the US Federal Reserve think that an interest rate hike in June was entirely possible IF incoming data showed that the economy was improving.

Ah, our old friend, the ‘data dependent’ line…

How much of this rhetoric is just to smooth out market expectations which are leaning far too much toward barely the one interest rate hike for 2016 is yet to be seen, but to me that’s all they are doing here.

But while the recent economic data out of the US has been relatively positive, uncertainty from a global economic perspective still reigns supreme and leaves huge questions when you think about the Yellen rhetoric leading into the Christmas hike.

Interestingly, Fed funds futures have re-priced from a 14% chance of a June hike yesterday, to a 30% chance today. That’s not small, and shows where savvy traders can profit from markets trying to front run expectations and getting too far out of whack with reality.

Yields on US treasuries jumped and as we also highlighted yesterday, the S&P 500 continued to come under pressure as both fundamentals and technicals lined up on Indices.

From a Forex trading perspective, the hawkish minutes however, did put a rocket under the US Dollar for the session. Most notably pushing USD/JPY back above the hugely significant 110.000 psychological level.

USD/JPY Daily:
160519_usdjpy_daily
Click on chart to see a larger view.

We’ll run through some more charts on the @VantageFX Twitter account today, but this is your key level for today’s trading day.

Bremain keeps Pound Top:
While the US Dollar got a nice boost on the back of the hawkish FOMC Meeting Minutes, it was actually the British Pound that was by far the best performer for the day.

Cable rallied hard as shorts betting on uncertainty following Carney’s Brexit comments last week were forced to cover and momentum started to roll. This bout of short covering was thanks to just one of many Brexit polls conducted by the British newspaper, the Evening Standard. The poll gave an 18 point lead to those voting to ‘Bremain’.

God I love the word ‘Bremain’!

GBP/USD Daily:
160519_gbpusd_daily
Click on chart to see a larger view.

The Cable daily chart shows the confluence of resistance between the horizontal zone that has acted as both support and resistance in the past, as well as the slightly subjective trend line that keeps getting re-drawn…

GBP/USD Hourly:
160519_gbpusd_hourly
Click on chart to see a larger view.

Still looking at the way price on the lower time frame charts react to longer term trend lines amazes me when I see things like this latest re-test of broken daily trend line resistance on the hourly chart.

Just remember that price is still capped by that horizontal resistance zone, and as traders that have even short memories back to the headline or poll driven moves in the Scottish Referendum and the entire Greek defaulting saga remember, a single day’s price spike can just as easily be erased the very next day when the market realises its short sightedness.

Keep trading your major, higher time frame levels and don’t get too caught up in headline driven price shenanigans and you will be fine.

———

On the Calendar Thursday:
AUD Employment Change
AUD Unemployment Rate

GBP Retail Sales m/m

USD Philly Fed Manufacturing Index
USD Unemployment Claims

Keep an eye on the @VantageFX Twitter account as we look to share some possible intra-day buy levels on the Aussie Dollar pairs that fit in with the narrative above. Trade with leading ECN Forex Broker, Vantage FX by taking advantage of levels on your own live Forex account.

Dane Williams – @VantageFX

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