FOMC, Wheeler and a Cable Overview

July 29, 2015

The day has arrived. While economic factors have pushed back the earliest possible liftoff month to September or December, it’s the tone of tonight’s FOMC statement that will have the most significant impact on Forex markets.

With the odds of a rate hike in September now priced in at 50/50, I am of the opinion that they are more likely to move using a policy of stabilisation rather than being forced into hitting the market hard with multiple hikes clumped together. It’s all about beginning the normalisation process after rates have been at zero for so long and hiking early in September is conducive to this train of thought.

The fact that Yellen has persistently said that the Fed favours moving gradually over a longer period of time is pushing the point that September is in play.

Take a look at our Monday FOMC chart preview in the Technical Analysis section of the Vantage FX News Centre here.

Wheeler Speaks:
Reserve Bank of New Zealand Governor Wheeler this morning delivered a speech titled ‘Monetary policy supporting growth and inflation goal’ at the Tauranga Chamber of Commerce. The full transcript of his speech can be found on the RBNZ website, with the few key points taken out below.

NZD/USD 15 Minute:
Click on chart to see a larger view.

“Some further easing seems likely.”

“Further NZD depreciation necessary.”

“Several risks around inflation outlook.”

3 statements that have become fairly standard from the RBNZ. The market instead choosing to rally on the final, positive point.

“Several factors are supporting economic growth.”

NZD/USD Weekly:
Click on chart to see a larger view.

Most interesting to me as a primarily technical trader, is that heading into the speech, the Kiwi bounced off the above weekly support zone. Very clean!


On the Calendar Wednesday:
NZD RBNZ Gov Wheeler Speaks
JPY Retail Sales

USD FOMC Statement
USD Federal Funds Rate


Chart of the Day:
As its FOMC week, we have been looking at the majors heading into tonight’s meeting. This morning we take a look at Cable and how its been behaving.

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

The Cable daily chart shows the change in trend once price broke the major bearish trend line, settling into a short term bullish channel that has now taken a front seat.

This chart shows the divergent monetary policies between the Bank of England who are looking to hike and for example the Reserve Bank of Australia or the ECB who are still easing or maintaining an easing bias, with Cable the only major pair that is now in a bullish trend.

GBP/USD 4 Hourly:
Click on chart to see a larger view.

Looking a little closer on the 4 hour chart, going with the trend you can see that price pulled back into a demand zone where price had previously kicked out of, touching it with wicks and moving higher. The fact that it was with the trend and its proximity to channel support provided traders who want a wider stop a bit more breathing room.

From here, stops above the short term resistance at 1.56700 are in play. It will be interesting to see if they act as a magnet heading into FOMC.

What are your thoughts on trading Forex with Vantage FX at these levels? Let us know by leaving a comment below or mention @VantageFX on Twitter.

Dane Williams – @VantageFX

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