Sell USD After Dovish Powell And FOMC Minutes
EUR/USD
Trading strategy: Long
Open: 1.1390
Target: 1.1510
Stop-loss: 1.1330
FOMC minutes suggest a pause in quarterly rate hikes after December move
Minutes of the November meeting show policymakers ticking off a series of issues, including a tightening of financial conditions, global risks, "and some signs of slowing in interest-sensitive sectors," that had begun weighing on their view of the economy.
A few participants who agreed further rate increases were likely to be warranted also "expressed uncertainty about the timing" as Fed officials discussed how to communicate a possible change in their approach to future hikes.
"Participants also commented on how the Committee's communications in its post-meeting statement might need to be revised at coming meetings, particularly the language referring to the Committee's expectations for 'further gradual increases' in the target range for the federal funds rates," the minutes said.
"Many participants indicated that it might be appropriate at some upcoming meetings to begin to transition to statement language that placed greater emphasis on the evaluation of incoming data in assessing the economic and policy outlook; such a change would help to convey the Committee's flexible approach in responding to changing economic circumstances."
The need for "further gradual rate increases" as appropriate to keep the current recovery on track has been a staple of recent Fed policy statements as the central bank nudged rates back toward more normal levels after a decade near zero. Its removal would flag a possible pause in roughly quarterly hikes that had been expected to continue through 2019, without committing the central bank to moving or not moving at any particular meeting.
How do we trade? RSIs are biased up and the November 28 bull engulfing candle sees upside follow through today. Dovish Powell on Wednesday and today’s FOMC minutes suggest that we will probably see a pause after December rate hike and this should weigh on the USD in the coming days/weeks. We opened EUR/USD long at 1.1390.
Disclosure: Long EUR/USD at 1.1390.
Other factors are very important to that decision. The outcome of US-China trade talk, G20 meeting, Brexit outcoming on December 12 when parliament members are expected to vote. Overall, the US dollar fundamental remained strong but going forward we are expecting huge shares buyback and lack of broad-based investment by business to nullify the advantage of tax cut, especially with rising cost of production and possible tariffs per adventure US and China failed to reach an agreement. However, the decision to sell the US will depend on paired currency.