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Fed Hints At Sept. Hike, No One Believes- June 18, 2015

FOMC Tries To Make Markets Believe Rate Hike Coming

Janet Yellen tried to put on a good show yesterday but just a look at the USD this morning shows they didnt believe much of it. Equities did close lower but the USD should have gained some strength if they really thought there would be a rate increase in September. My guess is that more folks are now looking at the details rather than listening to the rhetoric. Once you see that Fed members actually have gotten more dovish than hawkish it makes more sense. Even the Fed mouthpiece Hilsenrath had it in his article.

The interest rate projections showed that two officials don’t want to move rates at all this year. Five officials, on the other hand, want to move rates up by a quarter percentage point and another five want to move it up by half percentage point. In March, only one official saw a quarter percentage point increase and seven saw a half percentage point rise. The shifts show the center of gravity on the number of rate increases this year is moving down.

The median estimate for rates in 2016 has shifted down to 1.625% from 1.875% in March. The median estimate for 2017 has shifted down to 2.875% from 3.125% in March.

Looks to me like the potential for any hike is dropping substantially. Below is a more humorous take on her comments. Sounds funny until you realize the truth in it.

*YELLEN: WAITING TOO LONG TO RAISE RISKS OVERSHOOTING INFLATION (in financial assets?)

*YELLEN SAYS POLICY MOVES TO DEPEND ON WIDE RANGE OF DATA(any excuse)

*YELLEN: WHAT SHOULD MATTER TO MARKETS IS THE ENTIRE POLICY PATH (Do Not Sell!)

*YELLEN SAYS THERE HAS BEEN SOME PROGRESS ON INFLATION (but do not sell)

*YELLEN SAYS DOLLAR APPEARS TO HAVE LARGELY STABILIZED (with extreme volatility)

*YELLEN SAYS FED DOESN’T EXPECT TO FOLLOW MECHANICAL RATE MOVES (because everyone knows this will go pear-shaped)

*YELLEN SAYS IT MIGHT HAVE BEEN BETTER TO TIGHTEN FASTER 2004-06 (ya think!!!)

*YELLEN SAYS FED TRIES TO BE TRANSPARENT, ACCOUNTABLE (apart from when Congress asks)

EUR/USD Push Up From Range On FOMC

With the FOMC push from the range on the EUR/USD I will have a bias for the next move up today while still cautious due to the potential for a Greek tape bomb today. At this point the USD us weak but any bad news from the meeting with Greece could make the Euro weaker. The best level I see for a long today is at the Asian lows of 1.1329 where its finding support at Tuesdays highs. However a dip to 1.1315 or 1.1294 wouldn’t surprise me if they want to take stops below and suck in some breakout traders. I will be open for the short around 1.1356 but will need enough price action to change my bias.

EURUSD 6-18-2015

GBP/USD Runs Two Full Pushes

The GBP/USD ran two full pushes yesterday thanks to better UK data and the Fed of course. Notice how they conveniently ran stops below before making the second run to the upside. Today I will be bias for the long but more open than usual since there is potential for a retrace of the Fed induced inefficient move. The best level is a daily high down at 1.5787 but being so far away from current price lowers the probability for a test so I will be open for the long around the Asian lows at 1.5820. In order to consider a short I will need to see yesterdays highs hold and set up or false conviction confirmed during London today. If potential conviction holds during London I will look for the long for a continuation entry.

GBPUSD 6-18-2015

EUR/JPY Pushes Up With USD/JPY

In what seems to be more rare these days the EUR/JPY pushed up with the UJ yesterday. Until Janet opened her mouth of course. This morning we have some solid conviction to the upside above Tuesdays highs giving me the bias for a push up. I will be cautious considering the failure of the last show of conviction but will look for the continuation entry at the Asian lows around 139.85 or yesterdays highs just above. I will be open for the short but will need to see that they are pushing with the Euro.

EURJPY 6-18-2015

 

Forex News Today

The calendar is busy today starting with the SNB rate decision. Usually I dont mention the CHF news but if they go further negative it could get them pushing the EUR/CHF heavy and effect the EU. Next is the ECB Economic Bulletin where they will be watching to see if the ECB sees weakness in the European Economy, having potential to add more QE down the road. If so the Euro has more potential for weakness as well.

The UK has Retail Sales data expecting to drop on the higher impact monthly release. Setting the bar so low does increase the chance of a miss to the upside but even though the Average Earnings has been positive lately it seems as though the Brits arent spending their gains if Retail sales cant improve. Not good for the GBP.

The US has CPI data expecting a slight drop along with Thursday Unemployment Claims expected to drop by 5k. If CPI drops below zero then we should see more USD weakness and the same goes for an increase in Claims closer to 300K which wouldnt surprise me considering all the layoff announcements lately. However that being said it may take a couple months before they hit the data. Later in the NY session is the Philly Fed Mfg. release expected to rise but considering of the last 5 releases, 4 were disappointments, the probability for a miss to the downside is higher.

Asian session traders have a BOJ press conference to be on the look out for tomorrow.

Happy Trading

Chad

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