Fed’s Lockhart Gives a Tell + RBA Breaks it’s Jaw-boning

August 5, 2015

Atlanta Fed’s Lockhart Speaks:
A hump day interview with the Federal Reserve Bank of Atlanta President Dennis Lockhart gave USDX bulls something to cheer about, indicating that the US economy is ready for its first increase in interest rates for nearly 10 years.

After St Louis Fed President James Bullard said on Monday that “We’re in good shape to lift rates in September”, Lockhart has added to the chorus of Fed officials calling for a September liftoff. Lockhart is especially important as he is considered a ‘centrist’ among Fed officials, making his often swinging opinion all that the more important.

“It will take a significant deterioration in the economic picture for me to be disinclined to move ahead.”

“My priors going into the [September] meeting as of today are that the economy is ready and it is an appropriate time to make a change.”

You can read more of the WSJ article from Hilsenrath here. (And remember if it comes up gated, just copy and paste the headline into Google News.

RBA Holds Strong:
The ‘no change’ in yesterday’s Cash Rate was widely expected, but it was the removal of the ‘jawboning’ or talking down the Aussie Dollar and rates that kicked AUD/USD into gear. The Aussie rallied over 100 pips yesterday on the back of better than expected Retail Sales and Trade Balance data, with the removal of the easing bias from the RBA’s statement the kicker.

In our RBA Preview yesterday morning, we spoke of what could be considered ‘fair value’ for AUD/USD as well as how tiresome the jawboning from Stevens has become. At these levels and with economic data starting to pick up again, the threats have been hollow and we’ve even seen the Aussie spike up on any attempt to jawbone it down. The market called the RBA’s bluff and they duly conceded.

Stevens is surely sitting back in his big leather office chair with one leg crossed looking out over Martin Place in Sydney saying ‘Over to you now Janet’. Probably.

Lastly on the Aussie, I know a few of you love to hate anything Terry McCrann writes after his seemingly arrogant, inside knowledge reported a few months ago. Here’s T-Dogs’ latest piece for the Herald Sun. Personally, I liked him more when he was making outlandish predictions (that were on the money mind you) about the direction of Australian monetary policy.


On the Calendar Wednesday:
NZD Employment Change q/q (-0.3% v 0.5% expected)
NZD Unemployment Rate (5.9% v 5.9% expected)
CNY Caixin Services PMI

GBP Services PMI

USD ADP Non-Farm Employment Change
CAD Trade Balance
USD Trade Balance
USD ISM Non-Manufacturing PMI


Chart of the Day:
Yet more fresh new highs for USD/CAD. This thing has gone completely parabolic with no sign of slowing down.

USD/CAD Daily:
Click on chart to see a larger view.

This chart shows the power of Forex trading in giving you the ability to let your winners ride. If you remember back to April, in the Vantage FX News Centre we were discussing buying USD/CAD at good levels over 1000 pips ago. If you were following on Twitter, we took it up to our target at the top of the short term channel/flag for 500 pips, but look at what was possible if you had left even a single lot open.

So many Forex traders fail because they don’t have the discipline to compound winning positions or let a portion of them ride. Do some study on this USD/CAD move and try to identify key areas where you could have added to your position, either risk free or keeping your risk the same as when you made your original entry.

Let us know your thoughts and findings by opening an account or mention @VantageFX on Twitter.

Dane Williams – @VantageFX

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