“Worry has huge eyes”: something like this can be stated about the scenario on the foreign exchange market on the eve of the last Federal Reserve meeting this year. The dollar index dives down, showing the weak position of greenback versus a basket of significant currencies, and the yield of 10-year treasuries fell to 2.83%, lastly leaving the area of three percent. It is most likely that panic in the near future will only increase, especially after the current remarks of US President Donald Trump. It deserves keeping in mind here that members of the American regulator are required to observe a “silence regime”for 10 days prior to the conference itself– this rule is strictly observed by them. The president of the nation is not burdened with such limitations. And although Trump’s predecessors attempted not to discuss the Fed’s actions at all, the existing owner of the Oval Office has been putting verbal pressure on the Fed for a number of months. In the summertime of this year, he rather rigidly discussed the next rate hike, stating that the actions of the reserve bank harm the economic growth of the country. After that, Trump returned to this problem several times, calling the Fed’s policy “crazy.”
Jerome Powell diplomatically ignored the criticism of the head of state and did not alter the tone of his rhetoric. This fact soothed the markets for a while– till completion of fall, the Fed members began speaking about the level of the neutral rate. Richard Clarid said that the interest rate has actually practically reached its neutral level, so additional tightening of financial policy might have a negative impact on the crucial indications of the US economy. Then Powell discussed this topic: in his opinion, the rate is “simply below” the neutral range. And although this range is rather wide (2.5%-3.5%), this position of the Fed chief has actually disappointed market individuals. Not so long ago he said that the regulator might exceed the neutral level if the primary indicators of the economy grow at an advancing pace.
Simply put, traders have well-founded worries that the regulator will take a more careful position concerning future prospects. That is why the dollar feels rather uncertain at the start of this week. Donald Trump likewise included fuel to the fire, which a few hours before the start of the two-day conference once again slammed the possible tightening of monetary policy. In his Twitter account, he said that raising the rate in the present conditions is “astounding.” In his opinion, in the conditions of a strong dollar, low inflation and a slowing economy of China, it is definitely impossible to raise the rate.
Today he supplemented his viewpoint with another tweet, the text of which is worth pricing estimate: “Do not let the market end up being even less liquid than it is now. Feel the market, don’t simply go after the useless numbers.” I think any comments are unnecessary here. And although de jure Trump has no direct influence on the Fed, the position he voiced complemented the gloomy image on the eve of the essential meeting for the dollar.
The weakening of the US currency allowed the euro-dollar pair to show a more or less clear correction: the cost again approached the borders of the 14th figure. The single currency has likewise discovered a reason for its development: an impressive with the problem of the Italian budget plan might end tomorrow. According to the European press, the European Commission will announce its decision on Wednesday. If the parties still come to a compromise, the euro will get a strong sufficient support, given that this concern has actually kept traders in thriller because the start of autumn.
In addition, versus the background of an empty financial calendar, a report from the IFO was published today: on the one hand, the signs came out worse than the projection worths, but, on the other hand, the remarks to the report balanced out the negative effect. According to experts of the research study institute, although the German economy is slowing, it does disappoint indications of economic crisis. This is a really weak reason for optimism, but versus the background of a weakening dollar, it was the inspiration for a small boost in EUR/USD.
From a technical viewpoint, the scenario is as follows. On the four-hour chart, the pair reached the upper line of the Bollinger Bands indication (1,1401), however stopped working to break it, so it pulled back by numerous lots points. Despite an unsuccessful assault attempt, the cost still remains within the short-term upward motion, as the Ichimoku Kinko Hyo sign formed a bullish “Parade of lines” signal. The nearby target of the impulse is the 1,1401 mark, when getting rid of which it will be possible to talk about the development of the upward movement (up to the 15th figure, that is, to the upper limit of the Kumo cloud on the everyday chart). But this growth can just be because of the “dovish” outcomes of tomorrow’s Fed meeting.The material
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