Fed rate hike – Page 2

BoE To Shock The Market With A Bigger Rate Hike?

June 16, 2022/in General News & Updates /by MaimarFX

What a trading day!

The Federal Reserve raised rates by 75bp, the biggest interest rate increase since 1994 and prices whipsawed. The EUR/USD tried to break its crucial support around 1.0350 with an all-time low sitting at 1.0340 but such historical bearish break seemed to be precipitously which is why prices consolidated around 1.0450, for now. The British pound rose on elevated rate hike expectations and provided some good profits for traders at the end of the trading day. The central bank’s aggressive tightening brings the economy closer to a recession and the effects will only be felt later on. In other words, we still have a long road ahead of us.

Today all eyes will turn to the Bank of England’s rate decision and to the British pound’s reaction to it. The BoE is expected to hike rates by (only) 25bp, compared to yesterday’s big Fed move. The risk for the GBP/USD is to the downside, since the BoE may have to take a more cautious approach to raising rates after data showed a surprise contraction in the U.K. economy in April. Most attention will be paid to the vote split of today’s decision for further insight into the BoE’s overall appetite for higher rates.

The BoE rate decision is due at 11:00 UTC.

A bigger-than-expected rate hike would be a shock and could send the pound above 1.2210 and further to a higher target of 1.23. Bears on the other side should pay attention to a slide below 1.2080 which could see another test of 1.20.

Our trading ideas for today 16/6/22:

GBP/USD

Long @ 1.2160

Short @ 1.2115

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Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumption of MaiMarFX traders. They are not meant to be a solicitation or recommendation to buy or sell a specific financial instrument.

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Is A Fed 100bp Rate Hike In The Cards?

June 15, 2022/in General News & Updates /by MaimarFX

It’s Federal Reserve decision day and anything from a 50bp to a 100bp in the federal funds rate is forecast. The Fed is facing the highest U.S. inflation in four decades which is why some market participants suggest that a full-percentage hike is on the table to show the Fed’s commitment in the inflation fight. However, chances of such a big move are only at 10 percent. The baseline scenario is a 50bp increase at today’s meeting.

The FOMC committee will release a statement and updated economic estimates at 18:00 UTC and Fed Chair Jerome Powell will hold a press conference 30 minutes later.

How will the U.S. dollar react?

In case of a well-priced-in 50bp rate hike, the dollar could even fall on disappointment. In case of a 75bp rate hike, the dollar will further strengthen. And in case of a 100bp hike, it will be a very bullish scenario for the greenback but chances of such a hike are small.

Furthermore, the focus will be on the Fed’s dot-plot, growth, inflation and jobs forecasts. Particular attention will also be paid to Powell’s press conference.

We wish you good trades for today!

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Bleak Economic Outlook

June 13, 2022/in General News & Updates /by MaimarFX

Welcome to a new trading and central bank rate-hike week.

After an unexpectedly higher U.S. inflation reading last Friday, chances for a 75bp Federal Reserve rate hike at the upcoming FOMC meetings are rising.

The Fed is expected to raise rates by 50bp on Wednesday but the main focus will be on the quarterly summary of economic projection which includes the dot-plot rate projections. Fed policy makers may pencil in a steeper path of interest rate hikes this year in the light of recent inflation developments. While a 50bp rate hike this month is all but certain, traders speculate on an even bigger rate hike of 75bp, and if not in June, then maybe in July. Apart of the hawkish guidance, the focus is shifting to the broader impact of the central bank’s policies on the economy. Aggressive rate hikes are having little effect on rising price pressures while the economy is cooling. Economists at Bloomberg put the chances of a recession at three in four next year saying “a downturn in 2022 is unlikely, but recession in 2023 will be tough to avoid”.

Last but not least, the Bank of England is widely expected to raise its interest rate on Thursday from 1 percent to 1.25 percent. Some market participants even price in some probability of a 50bp hike but this seems to be the much more unlikely scenario. Overall, the pound is anticipated to fall even further since the U.K. economy looks set to struggle.

GBP/USD – Bearish breakout

Sterling broke below 1.24 and the yearly low at 1.2155 isn’t all that far away now. Bears will now focus on price breaks below 1.2240 and 1.22. If the yearly low is cleared, there might be nothing in the way of a fall towards 1.20. The former support at 1.24 could now serve as a resistance.

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U.S. Dollar Retreats As Fed Goes Predictable Route

March 17, 2022/in General News & Updates /by MaimarFX

The U.S. dollar retreated following the Federal Reserves’ statement as the central bank went the predictable route. Policy makers have finally realized they have a serious inflation problem and need to act. While they are willing to hike rates faster and higher than previously expected, Fed Chair Jerome Powell played down the risk of recession for the U.S. economy. However, the 25bps rate hike and the projection of six more increases this year were already priced in, which is why the greenback retreated.

While waiting for bigger moves, we have tried two buy attempts in the EUR/USD that finally ended with a net loss of -10 pips as gains were capped at 1.1040.

GBP/USD – All eyes on the Bank of England rate decision today at 12:00 UTC

The BoE is expected to hike 25bps today, the third rate increase in row.

Technically, we will pay attention to a significant break above 1.3210 in order to anticipate further gains towards 1.3350. Bears on the other side will watch out for prices below 1.3080 in order to shift their focus to lower targets at 1.2950 and 1.29.

Our short-term trading idea for 17/3/22

GBP/USD

Long @ 1.3210

Short @ 1.3140*

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Inflation Is The Biggest Risk

March 14, 2022/in General News & Updates /by MaimarFX

The war in Ukraine enters its third week and the outlook for financial markets is seriously uncertain. Global geopolitical risk, a slowdown in growth, high inflation and central banks that will be forced to tighten add to concerns about the global economic recovery.

The biggest risk is inflation. The Federal Reserve is expected to lift interest rates by 25bps on Wednesday. The focus will however be on the Fed’s official forecast and the outlook beyond the six quarter-point rate hikes this year that are already priced in. The questions will rather be: How high could rates ultimately go and how quickly will officials move to get there. The Fed’s dot plot of rate projections will thus play a key role.

Apart from the Fed, the Bank of England is also widely expected to hike 25bps for a third straight meeting on Thursday.

What do we expect technically in both EUR/USD and GBP/USD pairs?

In the run-up to Wednesday’s FOMC decision we anticipate further USD strength with lower targets seen at 1.0730-1.07 in the EUR/USD and 1.2970-1.2950 in the GBP/USD.

GBP/USD: If 1.2950 holds, the cable may recover some losses towards 1.32 on a hawkish BoE.

EUR/USD: If the euro is unable to break above 1.1050, chances remain in favor of the bears with next lower targets seen at 1.07 and 1.0640.

Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumption of MaiMarFX traders. They are not meant to be a solicitation or recommendation to buy or sell a specific financial instrument.

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Will The Fed Shock The Market With An Inter-Meeting Rate Hike?

February 14, 2022/in General News & Updates /by MaimarFX

The U.S. dollar benefited from safe-haven flows amid risk-off sentiment. Cash flows into the dollar do not only stem from escalating geopolitical tensions at the border of Russia and Ukraine but also from rate hike speculation. Traders are increasingly convinced about the possibility of a Federal Reserve 50-bps rate hike next month. There was speculation about a rare inter-meeting Fed move before the Fed’s March 15-16 meeting but this move is very unlikely. With only the January data at hand showing broadening price pressures and amid lingering geopolitical unrest the Fed will favor to wait and taking in further data before making such aggressive move.

St. Louis Fed President James Bullard, who favors three hikes by July, said the Fed isn’t “in that mode” of emergency rate hikes, noting that there is little need to surprise markets now given the tightening they are pricing in already.

Nevertheless, traders should be aware of a potential escalation around the Ukraine border that can sent the markets into a tailspin.

EUR/USD – Poised for a slide towards 1.1250?

After the resistance around 1.1490 proved its hold, the euro seems to be primed for a move south toward the support area between 1.1270 and 1.12. We will maintain a neutral stance as along as the euro remains between 1.1450 and 1.12 but in case of a renewed break below 1.1180, our next target will be at 1.11.

GBP/USD: The cable was recently captured between 1.3650 and 1.35. Bulls will now wait for a break above 1.3670 while bears will wait for a slide below 1.3490 in order to sell sterling toward 1.34.

Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumption of MaiMarFX traders. They are not meant to be a solicitation or recommendation to buy or sell a specific financial instrument.

We wish you good trades!

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Hawkish Fed Boosts U.S. Dollar

January 27, 2022/in General News & Updates /by MaimarFX

And at the end of the Federal Reserve story, traders that had hoped for a short squeeze in some USD-crosses left disappointed. Thus, we had to be satisfied with some small gains when trading the dollar’s rise.

Overall, yesterday’s FOMC decision was viewed as hawkish. As a result, bond yields moved higher and the U.S. dollar appreciated. Fed chair Jerome Powell said the central bank was ready to raise interest rates in March (which was expected) but the most hawkish take-away is that Fed policy makers didn’t rule out moving at every meeting to tackle the highest inflation in a generation. In other words, the central bank is willing to hike faster given high inflation than ease in the face of downside surprises.

The greenback advanced. Let’s briefly look at the next targets in both EUR/USD and GBP/USD.

EUR/USD: Next bearish target is the 1.12-handle. If the pair breaks below 1.1180, we will turn our focus to a next medium-term target at 1.10. As long as the resistance at 1.14 remains intact, the outlook is bearish.

GBP/USD: Support area between 1.34-1.3370 is still intact. Bears will wait for a break below 1.3350 in order to sell sterling towards 1.32. A current resistance-area is however seen between 1.3670-1.37.

Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumption of MaiMarFX traders. They are not meant to be a solicitation or recommendation to buy or sell a specific financial instrument.

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Try out our new signals for cryptocurrencies:

ETH/USD

Long @ 2470

Short @ 2380

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Loss of Fed’s Credibility to Hurt The U.S. Dollar?

January 24, 2022/in General News & Updates /by MaimarFX

A new trading week kicks off and top event risk will be the FOMC rate decision on Wednesday.

The Federal Reserve’s abrupt departure from being patient on inflation which was still considered ‘transitory’ just a few months ago to panicking on inflation with a current probability of four rate hikes in 2022 results in a loss of credibility. While a March rate hike is almost a done deal to control the ‘previous transitory’ price pressures, a majority of economists predicted the central bank will use its January meeting to deliver a 25 bp or even a surprise 50 bp rate hike which would be the largest since 2000. Speculation about five rate increases this year is also on the table.

What will the Fed’s rapid shift mean for the U.S. dollar?

As we could see, U.S. dollar bulls seemed to be largely unimpressed by the Fed’s hawkish turn with the greenback experiencing even a drop against other counterparts. In the face of the central bank’s losing credibility, we could imagine that the U.S. dollar is at risk of dropping despite the Fed’s accelerated rate hike path.

Technically, both EUR/USD and GBP/USD look oversold in daily time frames which could lead to short-term upward movements. However, bulls should take a cautious approach as risk trends can slip. Current resistances are seen at around 1.37 in the GBP/USD and at 1.1430 in the EUR/USD. Bear in mind that dollar bulls could pile in ahead of the FOMC announcement but might take any potential profits quickly.

Apart of Wednesday’s FOMC decision we will have the 4Q U.S. GDP Thursday and the PCE deflator (the Fed’s favorite inflation indicator) Friday.

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Can Powell Meet The Market’s Hawkish Expectations?

December 15, 2021/in General News & Updates /by MaimarFX

Today is the Federal Reserve’s rate decision day and market participants expect the Fed to unveil a quicker tapering of bond purchases that paves the way for interest rate hikes next year. We will remain cautious going into the FOMC announcement at 19:00 UTC tonight.

Expectations are very high and so is the risk for disappointment. The market currently expects the Fed to raise rates next year three times with a 61.5 percent probability of at least three hikes. There is even a 31.8 percent probability of four rate hikes in 2022.

The broad-based U.S. dollar strength remained in-play until today as the market discounted the Fed’s hawkish approach but can the Fed live up to the market’s high expectations? Maybe not as the omicron variant created a bit of concern for economic trends and should the Fed share this concern at today’s press conference, investors could give up on dollar long positions. In terms of rate hike expectations, traders will want to see at least two rate hikes next year via the dot plot matrix to remain dollar bullish.

Anything is possible today and traders are well advised to maintain a cautious approach going into today’s policy decision.

Breakout-Mode

EUR/USD: Below 1.1220, euro-bears could send the pair for another test of 1.12/1.1185. If 1.1180 breaks, bearish momentum could accelerate toward 1.11 and maybe even 1.10 but for such a strong dollar move we would need a hawkish shift from the Fed. In case of a disappointment, we could see a short-squeeze with a test of the resistance zones at 1.1320-40 and 1.14.

GBP/USD: Holding above 1.3120 and 1.31 could pave the way for a reversal toward 1.35 and maybe even 1.37. The Bank of England is expected to hike next and if the dollar’s strength fades, sterling bulls may take the opportunity to push the cable higher.

Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumption of MaiMarFX traders. They are not meant to be a solicitation or recommendation to buy or sell a specific financial instrument.

We wish you good trades!

Any and all liability of the author is excluded.

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U.S. Dollar Remains On Solid Footing After Fed Decision

September 23, 2021/in General News & Updates /by MaimarFX

To sum up, yesterday’s FOMC announcement was hawkish enough to keep the U.S. dollar on a strong footing, even though big market movements were lacking. In terms of a first rate hike, Federal Reserve officials are now evenly split on whether or not it will be appropriate to begin raising rates as soon as next year. The market continued to price in a first hike around the start of 2023, an assumption that can be considered less hawkish and which has led to a very small sell-off in the greenback at the time when projections were released.

The dollar gained back ground around the time of the press conference with Fed Chair Jerome Powell saying the central bank could begin scaling back asset purchases in November and complete the process by mid-2022. This was the hint on tapering the market has expected.

As for fears over an economic collapse in China, Powell spoke on the Evergrande situation during his press conference but he does not expect any spillover into global markets. Market participants will now be looking to see if Evergrande makes its next debt payment which totals $83.5 million.

The next central bank decision is around the corner with the Bank of England monetary policy announcement due at 11:00 UTC today.

While risks are tilted for a hawkish outcome for the BoE meeting, there is a concern that markets may be overly optimistic amid the recent increase in rate hike calls by analysts. A rate increase is seen by May 22.

In the GBP/USD we continue to look at a price range between 1.39 and 1.3550 and bear in mind that the pair is still oversold making it vulnerable for corrections.