FOMC Minutes: Good Stuff, But Nothing Markets Didn’t Already Assume

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The FOMC Protocol showed the markets what many investors already knew, especially:

  • Many Fed officials said 1 or more 50bps highs can be guaranteed
  • The backs of FOMC remove the cap by 3 months or modestly longer
  • $ 95 billion monthly limit for asset drainage likely appropriate (markets sought $ 80- $ 100 billion)

However, this seems like old news, as Fed member after Fed member has more “fallen bowed” since March 16th.th meeting. Fed Chairman Powell spoke in mid-March and said that “if the Fed needs to tighten above a neutral rate, it will do so.” In addition, when asked what would prevent a 50bps increase at the May meeting, Powell replied “nothing!”. Yesterday, the Fed’s Brainard said that “the Fed is ready to take strong action if inflation and inflation expectation indicators suggest a need for such action.” As for the balance sheet, she indicated that the Fed could begin to reduce “quickly.” In addition, George of the Fed said a 50bps hike is an option we should consider. Today, Harker and Barkin of the Fed echoed these same sentiments.

The DXY continued its attack higher towards the 100 level. The first resistance is at the 127.2% Fibonacci retracement of the March 7 highth to the lows of March 30thth, is 99.89. If price can trade up there, the next resistance level is psychological round number resistance level at 100.00, then the 161.8% Fibonacci extension of the same recently mentioned time frame at 100.49. First support is at today’s low near 99.31, then the top, upward sloping trend of the long-term channel near 99.00. Down there, the DXY may fall to horizontal support at 98.43.

forexcom 2022040711

Source: Tradingview, Stone X

GBP / USD has moved lower aggressively lower since making a near-term high on January 13thth at 1.3788. March 14thththe pair tested the 127.2% Fibonacci retracement of the December 8 lowsth2021 to the highs of January 13thth, about 1.3000. Price failed to break below and bounced to resistance near 1.3273. GBP / USD is now moving lower and seems to be trying to test the 1.3000 level again. If price breaks below, November 2020 horizontal support is at 1.2854, then the 161.8% Fibonacci retracement of the same time frame near 1.2793. Resistance is on March 23rdrd highs of 1.3298, then horizontal resistance at 1.3486.

forexcom 2022040712

Source: Tradingview, Stone X

The Protocol of March 16th The FOMC meeting had some good news, but it was a bit out of place because almost all Fed speakers have been hawkish lately. However, the DXY continued its move to 100.00 and GBP / USD tried to approach 1.3000. If the hawk signals continue from Fed officials, prices may reach those levels soon.

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