Perhaps the most important event today got to be the FOMC meeting. Even though we don’t expect fireworks-hopes for today’s rate hike stands at 2%, it will be important if anything about interest rates forward guidance especially in 2018 is mentioned in their statement. Interest rate normalization plus balance sheet re-calibration are some of the tightening measures the central bank has so far initiated. If we know what their 2018 interest range or number is, then USD bulls will be better placed in buying and holding while gaining from the resulting positive swaps against the Yen, Euro and even the CHF. Now, tomorrow all eyes will be on Dr. Yellen, we expect her to step aside come February 2018 but it is understood that just like her Fed deputy chair who resigned for “personal reasons”, she doesn’t really “want” the job either and didn’t expect to extend her stay at the helm.
From what have been gathered, Fed governor Powell is leading the pack but the chair will entirely depend on President Trump. The leading candidates are hawks but it is public knowledge that Trump survived on loans and he actually defaulted on some.
So while we expect some independence from the Fed, it is my view that Trump may actually pick someone who might implement his agenda, likely boss around and keep the USD weak. In the mean time manufacturing activity slowed, ADP data beat expectations and it is most likely that the greenback shall continue to strengthen after NFP. NFP expected at 310K from -33K. A revision higher to compensate September’s weak job growth as a result of the two devastating hurricanes and maybe a tick lower in unemployment shall further propel the green back.
And again, look at the recent confidence index in October, Americans are confident that the economy will improve and that jobs are actually plentiful-at 36.5% of sampled correspondence, the highest it has ever been for 16 years. That’s not forgetting that average earnings are edged higher to 2.5% outperforming inflation which is around 2%. In light of that, any USD depreciation is viewed as a wonderful buying opportunity before Friday.
In the daily chart, it is clear that a break out trade is in play. First, notice that support trend line break out on 15.09.2017, after that price corrected higher as a stochastic buy signal was printed after 02.10.2017. Between 19.10.2017 and 25.10.2017, there was congestion and a consolidation in the lower time frame which retested the support now resistance trend line at around 1.13. From there on wards, check out that trickle down and a respect of minor resistance trend line at 1.12. Yesterday, price action closed as an inverted doji and made lower lows relative to the upper BB. Furthermore, notice that bearish divergence between price action and stochastics. It is now time to sell and I will trade as follows:
Stop Loss: 1.125
Take Profit: 1.05-1.08
Have a god trading day