As mentioned in yesterday’s post, careful treading was needed ahead of the much anticipated Fed rate announcement. Well, it sidestepped a lot of investors and as the market ignored the already priced in rate hike. The focus was shifted to the dot plot and Yellen presser. What we all know now is that the rate hike didn’t get full support and the Fed President Kashkari was against that decision. The dot plot pointed for 2 more rate hikes rather than the 3 hikes which could put interest rates at the upper limit-1.75%- of the dot plot by the end of the year. Further, Yellen was as always ambiguous and continued to advocate for an accommodative monetary policy in light of inflation and growth expectation. Employment was forecasted to slow down going forward. The Fed remained hawkish on business and consumer sentiment but this was not enough to help the tanking USD. The GBP on the other hand found some support in the European session after news emerged that it will be hard for Scotland to initiate another independence referendum ahead of UK’s Brexit. If they did of course the GBP would implode. This news set the pace of things to come later on in the NY session. Today’s BoE minutes/announcement would most probably take a cautious tone and interest rates will be unchanged. Going by fundamentals, the effect of Brexit is reverberating to every corner of the economy. Service, manufacturing and construction sectors is contracting with inflation rising. Retails sales dipped in the beginning of the year as inflation wiped off household’s purchasing power.
Today’s trade means we continue unloading the USD and follow the trend. The daily chart shows that price is turning from oversold territory with that bullish engulfing candlestick setting the pace. Considering yesterday’s volatility and range-going over 150 pips, I expect some USD come back and entry should be on the 30 min chart as we monitor BoE statement before NY session begins. The most ideal entry should come in somewhere at 23.6%-50% retracement levels. The 23.6% level is significant as it represents the anchor when the Pound rocketed, so that is the ideal support level. With Building permits expected to slow down, entry should be in the London session when there is a buy signal printed in the 30 min chart.
Buy Limit: 1.2180-1.2230
Stop Loss: 1.2140
Take Profit: 1:3 risk reward ratio
Have a good trading day.