According to Yellen and the Fed, investors should expect 4 more rate hike through end of 2018. This statement by itself is hawkish enough to restore investor confidence in matters USD. Remember, prior to yesterday’s Fed rate announcement and consequent FED live conference, USD rally was dependent on Fed reassurance that there will be another rate hike in December 2017.
We all knew balance sheet recalibration was to begin next month and despite the tightening aspect it brings, Fed officials were keen on monetary policy normalization. Matters inflation was also put to bed after Yellen said that factors which were damping prices was all but transitory and even if 3rd quarter GDP will likely slow because of the recent hurricanes, the economy is robust and will trend higher.
As a data dependent agency, they also remained confident of the labor market. They specifically noted that labor participation rate was promising and the recent slowdown in wages should not be a worry as they remained healthy and above Fed projected average. This was overly hawkish and spurred the USD demand.
Because of this, I remain a USD bull and will look to sell NOK in the coming weeks. Technically, there is a horizontal accumulation in the daily chart with price oscillating within 7.71 and 8.00 in the past two months. With oversold stochastics and a buy signal in the weekly chart, I will look to enter long in the daily chart as bullish momentum continues to build up.
I will trade as follows:
Stop Loss: below 7.7
Take Profit: 8.56
Have a good trading day.