MARKET BRIEFING – LONDON OPEN 25.09.2015
A little over a week ago, the Federal Reserve Chairwoman, Janet Yellen announced that the committee that she chairs had decided to keep the Fed Funds target rate at 0.25%
In a statement and the following press briefing, the FOMC boss emphasized a rather dovish tone. There are now, only two more rate decisions dates left for 2015 that take place on October 27 – 28 and December 15 -16.
With time seemingly running out, many traders, investors and other market participants are now expecting that there would be no move taken to increase the Fed Funds rate at the two up and coming meetings.
There are now increasing concerns over the economic slowdown in China. This is compounded by a pessimistic picture developing in other emerging market nations with fears that a sharp contraction in Latin Americas biggest economy, Brazil will affect other countries in the region.
There are also ongoing concerns with respect to the weak inflation picture with CPI data falling a long way short from its 2% target number. The anaemic inflation outlook is now compounded by the strong United States Dollar with the Green Backs strength now being a source of imported deflationary pressure as American business and industry are able to purchase foreign products and services at less expense.
The strong US Dollar will also have an eventual effect on growth, especially if it continues to appreciate in value. The concern is now growing amongst US producers that their products are being priced out of the market and making it increasingly difficult to export to global markets.
With so many factors stacked up against increase the Feds Fund rate before the end of 2015, it was understandable that the FOMC decided to hold back on an interest rate increase in September.
However, last night during a very long speech that was given to the University of Massachusetts, Janet Yellen decided to reignite the debate on the merits of a 2015 interest rate increase. Stating that the future outlook for US economy “generally appear solid”, Yellen went on to say the FOMC was “on track” to increase interest rates.
In contradictory statements, Janet Yellen during yesterday’s speech attempted to cover all her bases. On the one had the FOMC boss said of the current emerging market crisis that she and her fellow policymakers did not expect to significant impact on policy.
At the same time, on the question of inflation and a potential slow increase in CPI data. Janet Yellen said, “should such a development occur, we would need to adjust the stance of policy in response”.
From this viewpoint and as written in prior articles, if the time was not right to increase interest rates in September, why should the Federal Reserve take the next step and move in October or December. How much will really change during the last quarter to end a period of six years of historical low Federal Funds rates. Especially as such a move will cause the US Dollar to further strengthen and thus making US domestic production more uncompetitive.
Last night’s speech was a case of Janet Yellen trying to reel in the dovish sentiment that followed the overly accommodating comments of last week’s FOMC announcement. This deliberate attempt of forward misguidance will, of course, keep the markets on edge for the next three months.
EURUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.1340
Target 2: 1.1120
Projected range in ATR’s: 0.0111
Daily control level: 1.1050
GBPUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.5360
Target 2: 1.5125
Projected range in ATR’s: 0.01118
Daily control level: 1.5525
USDJPY
The intraday technical outlook
Trend 1 hour: Down
Target 1: 121.00
Target 2: 119.00
Projected range in ATR’s: 1.03
Daily control level: 120.55
USDCHF
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.9850
Target 2: 0.9650
Projected range in ATR’s: 0.0099
Daily control level: 0.9800
USDCAD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.3400
Target 2: 1.3200
Projected range in ATR’s: 0.0104
Daily control level: 1.3305
AUDUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.7120
Target 2: 0.6930
Projected range in ATR’s: 0.0095
Daily control level: 0.7160
GOLD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1165.00
Target 2: 1137.00
Projected range in ATR’s: 14.14
Daily control level: 1121.25
OIL
The intraday technical outlook
Trend 1 hour: Down
Target 1: 46.00
Target 2: 43.00
Projected range in ATR’s: 1.85
Daily control level: 47.25
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