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FED Yellen Holds Policy Unchanged

A guest post written by DAR Wong

Currency Market Observations – 26 September 2016

Fundamental Outlook

The U.S. Federal Reserve announces no rate adjustment but Yellen comments there could be a rate hike before year-end. Stocks climb but investors are waiting for the debate between Hillary Clinton and Donald Trump this week to check on potential trend of stock indexes. Japan abandons the monetary base target and adopts new policy framework on controlling yield curve.

The U.S. building permits rose 1.14 million in August and same figure as revised in previous month, pointing to weakness of housing demand. Weekly jobless claims dropped to 252,000 in the week ended 17 September and better than 260,000 in previous week. Another report on existing home sales rose 5.33 million in August, below forecast and lowest in past 6 months.

In the FOMC meeting, policymakers hold interest rates unchanged. FED chair Yellen says there will be a rate hike before year-end. Dow Jones market climbed after the announcement of no rate hike last week while NASDAQ Composite index reached historical high at 5342 levels.

The Bank of Japan keeps rates unchanged at minus 0.1% following its latest meeting and announces that it would modify its policy framework, marking the latest attempt to boost inflation. Among the changes, the BOJ says it will introduce yield curve controls, eliminate the maturity range of its bond purchases and abandon its monetary base target.

German producer prices shrank 0.1 percent in August and worst in 8 months’ record. Another data on German manufacturing index rises 54.3 in September and best in past 3 months, while services index slides to 50.6 that is worst record since June 2013.

On the euro bloc, manufacturing index reported by Markit gains 52.6 while services index advances 52.1in current month, both in-line with forecast. Eurozone official report says contraction in current account surplus at EUR21.0 billion after falling from EUR29.5 billion in June.

Technical Forecast

USD/JPY swung and slid last week after Bank of Japan announced new policy. Technically, we reckon the market trend has begun to move into new bearish phase. This week, resistance will emerge at 101.00 in case of pull-up but the trend may potentially slip to 99.00 bottoms.

EUR/USD has been hovering around EMA200 line but might be prepared to ascend upon weakening Dollar. This week, we forecast the trend may advance to 1.1350 while sit tight on1.1130 levels. Trade with risk control as market may be volatile due to debate among U.S. Presidential candidates.

GBP/USD has been building firm support at 1.2850 over past 2 months but still unable to advance higher. This week, we predict the trend will trade from 1.2850 to 1.3350 ranges while reacting to fundamental news. However, abandon your view in case the trend extends beyond the aforementioned range in either direction.

Dar Wong

This post is contributed by OPF Guest Blogger, DAR Wong.

DAR Wong is a registered fund manager in Singapore with 26 years of global trading experiences. You may reach him at dar@pwforex.com

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DISCLAIMER: This post is written for general information only. The author, publisher and/or any third party involved in the distribution of this work assume no legal responsibilities and shall have no liability whatsoever for any direct or consequential losses, costs or expenses arising from the use of the information contained herein.

 






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