Jerome Powell: get used to the smooth growth of interest rates

The turmoil with Brexit overshadowed the dynamics of the US currency, which, by chance, continues to increase its positions on the sly. The dollar index continues to be around one and a half year highs, reflecting the steady demand for the greenback. However, not all pairs are dominated by the dollar – for example, in the pair with the yen and the New Zealand dollar, the situation is mirrored, and the GBP/USD pair is completely at the mercy of Brexit, completely ignoring American events.

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But in general, the greenback did not fall off its peak after the elections to Congress, as predicted by many experts. As a result of the elections, the most predictable result was realized (although very unpleasant for the dollar), therefore the weakening of the national currency was temporary. This was followed by quite positive signals that returned confidence to dollar bulls. First, the head of the White House extended a hand of friendship to the Democrats, offering cooperation in terms of the legislative process. And although this curtsey will not save him from a wave of new investigations, nonetheless Trump was able to neutralize nervousness about the possible imbalance of the American political system. Secondly, the US has recently pleased dollar bulls with strong macroeconomic reports. In particular, the labor market traditionally supported the greenback.

Thus, unemployment remained at a record low of 3.7% (the lowest since December 1969), and the unemployment rate of U-6 (that is, taking into account part-time employees) fell to 7.4% last month (in September it was at 7.5%). The number of employed in the non-agricultural sector increased by 250,000 people in October, and the share of the economically active population in the United States rose to 62.9%, showing a positive trend. What is especially important – the growth of salaries accelerated in October. This indicator is closely monitored by the members of the US central bank as its growth or decline demonstrates the level of demand in the labor market and indirectly affects the dynamics of inflationary pressure. According to most economists, for inflation to move to its target level, wage growth in annual terms should be above three percent.

So, in October, this indicator exceeded the key target and amounted to 3.1%, confirming the forecasts of experts. But in order for the puzzle of inflation growth to be fully formed, it was necessary to neutralize the September slowdown in the consumer price index. Then the numbers were frankly disappointing, causing some anxiety in the ranks of dollar bulls. However, the data published this week reassured investors, despite the fact that the release did not exceed the forecast values.

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However, experts expected the growth of the CPI, and their expectations were fully justified: on a monthly basis, it reached three-tenths of a percent, and in annual terms, the indicator also came out at the level of forecasts, being at the level of 2.5%. Excluding food and electricity prices, the indicator similarly showed the dynamics of growth. On a monthly basis, it rose to two-tenths of a percent, and on an annual basis to 2.1 percent. However, the core inflation did not reach the forecast level, but it is not critical against the background of the general dynamics.

If we talk about the dynamics of US economic growth, we can not fail to say about today’s release. Retail sales also showed a significant breakthrough after a rather weak dynamics in August and September. But in October, the figure came out better than forecasts – both with and without car sales. Consumer activity of Americans also plays an important role for the Fed, as the indicator reflects the growth rate of the country’s economy.

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All this allows Fed Chairman Jerome Powell to keep the course for further tightening of monetary policy. During the last 24 hours, he gave a speech twice at various events in the United States, answering questions from the audience. After the first speech, the dollar index fell slightly, because Powell, according to the market, took a rather cautious position regarding future prospects. But during the second speech, he “rehabilitated” – in particular, he said that market participants should get used to the idea that the Federal Reserve will gradually but steadily increase the base interest rate. In addition, he recalled that next year he will hold press conferences on the results of each of the eight meetings of the Fed, hinting that the rate can be raised at any of them (now the decisions of the regulator are expected only at extended meetings).

Summarizing the above, we can conclude that the general fundamental background allows the Federal Reserve to further tighten monetary policy: the probability of a rate hike at the December meeting is estimated at 70%, at the first spring meeting next year – at 45%. Recent macroeconomic reports and comments of the Fed’s heads once again convinced the market of the regulator’s “hawkish” intentions.

The material has been provided by InstaForex Company – www.instaforex.com

GBP/USD. 15th of November. Results of the day. The fourth resignation of a minister. Who is next?

4-hour timeframe

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The amplitude of the last 5 days (high-low): 105 p-111 p-120 p-212 p-191 p.

The average amplitude for the last 5 days: 148 p (130 p).

The British pound collapsed during November 15 due to a new resignation in the British Parliament. This time, the Minister of Brexit Dominic Raab resigned voluntarily. And, like all previous ministers, in protest against Theresa May’s exit plan from the EU. What do we have in the dry residue? On the one hand, Theresa May and EU leaders claim that the Brexit agreement has been approved. The only thing that is needed is to have this bill approved by the Parliament of Great Britain. However, on the other hand, four ministers have already resigned as a sign of disagreement with Theresa May’s foreign policy. And, from our point of view, these mass resignations are a very strong indicator of the real circumstances and processes taking place in the UK government. Now it is difficult to say whether the Parliament of the UK will accept Theresa May’s Brexit option. Maybe they will. But the pound once again collapsed and simply ignores all the words of British politicians that the agreement has “almost” been reached. We believe that only thing that can save the British pound now is official information that the agreement was approved in Parliament and signed with EU leaders. Promises that the issue will be resolved soon will no longer be arguments for traders. No less important component in the collapse of the pound is the failed statistics on retail sales. The official report showed growth of only 2.2% against the forecast of 3.0% yoy. Thus, throughout 2018, the macroeconomic statistics of Great Britain has only been disappointing. And after Brexit things can get even worse…

Trading recommendations:

The GBP/USD pair sharply resumed its downward movement and strengthened below the level of 1.2817. Thus, now short positions with the target of 1.2677 are relevant again, and the pound is likely to expect a new long fall.

Buy-positions are now irrelevant, and, given the official data from the British Parliament, will become relevant soon. The pound will need very strong fundamental information to form a more or less long uptrend.

In addition to the technical picture, fundamental data and the timing of their release should also be taken into account.

Explanation of illustration:

Ichimoku Indicator:

Tenkan-sen-red line.

Kijun-sen – blue line.

Senkou span a – light brown dotted line.

Senkou span B – light purple dotted line.

Chikou span – green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD:

Red line and histogram with white bars in the indicator window.

The material has been provided by InstaForex Company – www.instaforex.com

EUR/USD. 15th of November. Results of the day. New political turmoil in the UK

4-hour timeframe

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The amplitude of the last 5 days (high-low): 95 p-53 p-116 p-78 p-85 p.

The average amplitude for the last 5 days: 85 p (89 p).

The European currency with grief in half, but still continues to adjust against the US dollar. However, it can be seen with the naked eye that the downtrend persists despite the intersection of the Tenkan-sen and Kijun-sen lines of the Ichimoku indicator, and traders are just waiting for the moment to open new short positions. There were no macroeconomic reports from the eurozone today during the day, and the report on retail sales in the US for September was much stronger than the forecast values, both with and without automobiles. Thus, the grounds for strengthening the US dollar during the day were, as usual, more than for strengthening the euro. The resignation of Brexit Secretary for the UK, Dominic Raab, should also be mentioned. This event refers to the EU indirectly, as the resignation does not mean the failure of the negotiations. However, this is another bad bell. From our point of view, if the European currency does not receive serious fundamental support in the near future, the downtrend will resume, perhaps even with a new force. From a technical point of view, the “Golden cross ” was formed, but it is extremely weak, and the price is not fixed above the critical line, but, on the contrary, the Kijun-sen line went under the price. Thus, long positions are now recommended to be considered very carefully or not at all. A turn of the MACD indicator downwards will indicate the completion of the upward correction.

Trading recommendations:

The EUR/USD pair maintains an upward correction. Thus, it is not recommended to open short positions until the current correction is completed. If the pair is fixed below the Kijun-sen line, and the MACD indicator turns down, it will serve as a signal for the opening of shorts with targets of 1.1218 and 1.1199.

It is not recommended to open long positions now, as the buy signal is very weak. In the event of a fundamental support of the European currency, it will be possible to consider the possibility of opening long positions in small lots.

In addition to the technical picture, fundamental data and the timing of their release should also be taken into account.

Explanation of illustration:

Ichimoku Indicator:

Tenkan-sen-red line.

Kijun-sen – blue line.

Senkou span a – light brown dotted line.

Senkou span B – light purple dotted line.

Chikou span – green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD:

Red line and histogram with white bars in the indicator window.

The material has been provided by InstaForex Company – www.instaforex.com

BITCOIN Analysis for November 15, 2018

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Fundamental Analysis of USD/CHF for November 15, 2018

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The dollar may lose the status of “safe haven”

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Oil returned to growth after 12 days of fall

On Thursday, November 15, oil prices were able to break the downtrend in the market. According to experts, it was the longest collapse in the history of trading. The cost of a barrel of WTI oil blend increased for the first time in 12 sessions.During y…

GBP/USD analysis for November 15, 2018

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Recently, the GBP/USD pair has been trading downwards. As I expected, the price tested the level of 1.2750. According to the H1 time – frame, I have found a hidden bearish divergence in the background on the MACD oscillator, which is a sign that buying looks risky. I also found the potential end of the upward correction in the background, which is another sign of weakness. My advice is to watch for selling opportunities. The downward target is set at the price of 1.2697.

The material has been provided by InstaForex Company – www.instaforex.com