FOMC Minutes Muted while Iran Comes to the Party

February 18, 2016

FOMC Minutes Muted:
January’s FOMC minutes have failed to excite, falling short of hawkish risk that we defined in yesterday’s daily market update.

The minutes appear to show that the level of uncertainty around the US economy has increased and a case is now being made for a much more restrained path toward further rate hikes. Not that the current path will be halted, just that the path of further increases could now be delayed.

Increased risks included an uncertain outlook toward inflation figures and financial confidence issues stemming from the Chinese economy. The Fed did maintain a relatively upbeat tone on the labour market but caution and tightening expectations were the theme of the minutes.

With markets having all buy prices out any expectation of even a single hike in 2016, the minutes really revealed nothing ground breaking and the subsequent market reaction was muted. Read the full release here.

Renowned ‘Fed watcher’, Jon Hilsenrath’s WSJ pieces are always a good read around Fed releases.

“The Fed used the word “uncertain” or “uncertainty” 14 times in the minutes. It used the phrase “downside risk” five times and “downside” seven times, compared with two times for upside.”

I’m sure there are algos trading off these words. If anyone has done a table counting common, negative words like this throughout Yellen’s term, then let us know as we’d love to share it on the blog!

Iran Comes to the Party:
Following on from yesterday’s attempt at a coordinated supply effort for oil between major players Russia and Saudi Arabia, markets sold off with the disappointment in the lack of involvement from the other major player, Iran.

Iran are in!… well tentatively at least.

Iranian Oil Minsiter Bijan Zanganeh was quoted by Tehran news agency Shana, as saying while Iran have welcomed the attempt to stabilise falling oil prices through a coordinated reduction in supply, they haven’t actually committed to any caps on production themselves.

OIL Hourly:
Commodities chart, OIL Hourly, 160218
Click on chart to see a larger view.

We have been speaking about how markets wanted to interpret yesterday’s release as a positive start, but just lacked that substance or trust that the substance would come to fruition.

Today’s quotes out of Iran go a long way to soothing these concerns and Oil has come back to test yesterday’s highs.


Chart of the Day:
This morning in Asia we see the notoriously unreliable, yet equally market moving Australian Employment data. Just look at the difference between surveyed economists’ expectations and you can see that nobody has a clue what to expect from the release.

But with that uncertainty comes trading opportunity, especially if you can make quick decisions around the key levels that the Aussie Dollar is sitting on as we head into the release.

AUD/USD 4 Hourly:
Forex chart, AUD/USD 4 Hourly, 160218
Click on chart to see a larger view.

Keeping in mind the higher time frame context of the key AUD/USD weekly support level that price is still respecting, zoom into the 4 hourly chart. Following a failed break lower, price has re-activated the channel bottom as support and has found some buyers into the release.

The Aussie has been ranging inside this weekly support level since as far back as June 2015 and by using a combination of the weekly level as well as these lower time frame support/resistance zones, a case could be built for building a long position.


On the Calendar Thursday:
NZD PPI Input q/q (-1.2% v 1.6% previous)
AUD Employment Change
AUD Unemployment Rate

USD Philly Fed Manufacturing Index
USD Unemployment Claims
USD Crude Oil Inventories

Do you see opportunity trading Forex on MetaTrader 4? Take advantage on your $50,000 Forex demo account.

Dane Williams – @VantageFX

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