Fundamentals and Sentiment – New Information (Economic Calendar)
We have been risk-on today.
It’s worth re-iterating the Fed’s position as per last night’s announcement:
Fed kept rates unchanged at 0.25-0.50% as expected with Fed’s George the lone dissenter in favour of hiking rates by 25bps, while the Fed also reduced their median Fed Funds Rate forecast which now implies 2 rate hikes this year vs a previous forecast of 4 in December.
The Fed also lowered their GDP forecast to 2.2% by the end of 2018 from 2.4% in December.
Fed Chair Yellen stated that global forecasts are down enough to affect their outlook and that caution is appropriate given rates are still near zero and proceeding cautiously lets Fed verify strength in the labor market. Fed Chair Yellen reiterated that every meeting remains live and they are not actively looking at negative rates. Chair Yellen highlighted that global developments pose some downside risks yet policy divergence is creating upside risks for the US economy.
Overall the release was interpreted as more dovish given the strong downward revisions to their forecasts which saw USD weaken across the board, while the prospect of lower rates for longer underpinned US equity markets and pushed the S&P 500 to its highest close YTD.
Today, we had the Bank of England’s MPC announcement:
Asset Purchase Target (QE) remains at GBP375B vs expectation of GBP375B. Interest rate unchanged at 0.50% vs expectation of 0.50%. The minutes show a unanimous vote of 9-0 to hold rates and QE. The Bank stated that it is more likely than not that the bank rate will increase over the forecast period adding that they remain watchful that low inflation is having second round effects on wages.
Fundamentals and Sentiment – Market Reaction
The Vix moves to a new 2016 low. In equities, the Hang Seng is up and the Nikkei essentially flat. Asia is down, as it Germany and France. The FSE100 and the S&P500 are up, the latter as expected after the Fed’s backtracking on interest rates yesterday. Bond yields are down in Germany, UK and US. Oil moves up for a second day as do other commodities. The USD index rises very slightly. The JPY index strengthens slighly and the commodity currencies are essentially flat as of 1620 GMT, although CAD and AUD had shown some volatility during the day.
Fundamentals and Sentiment – Financial Media
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Consider going long on H4 chart near the support line.
I placed a pending order at 10pm GMT last night as the down move was very strong. I felt it was unlikely to reverse straight away as the dollar was weak and the oil price was moving up, strengthening CAD. Stop at breakeven. I will re-assess tonight. I will either close or move stop very close to current price at the time.
We are still in the consolidation zone.
I placed a pending order at 10pm as the up candle was so strong, the dollar weak and the AUD index was up. Stop at breakeven. Again, I will re-assess tonight and either close or place a very tight stop.
Getting to the top of the consolidation zone. Continue to observe.
Canadian Core CPI and Core Retail Sales.
Your video is below (the detail on the trading plan starts at 6:15).
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