Fed taper – Page 2

Looming Fed Taper Talks Buoy The U.S. Dollar

May 27, 2021/in General News & Updates /by MaimarFX

The U.S. dollar and Treasury yields edged up Wednesday as investors weigh the possibility of a reduction in stimulus. Federal Reserve Vice Chairman for Supervision Randal Quarles said yesterday it will be important for the Fed to begin discussing in coming months plans to reduce its bond purchases. As we noted in previous posts, the next important Fed meeting will be on June 15-16.

Today we will have some U.S. data on tab such as jobless claims, GDP, durable goods and pending home sales that could affect the dollar’s price action in the afternoon.

Technically, we got what we have been looking for, at least in the EUR/USD where we saw a bearish price breakout sending the pair lower towards 1.2170.

Trading within the GBP/USD’s sideways range, however, has proved difficult as of late and thus we continue to wait for better trading conditions in this pair. Falling below 1.4070 we expect the cable to head for a test of the lower support area around 1.4030-20, whereas above 1.4160, bulls may attempt to push the pair towards a renewed test of 1.4230.

The DAX found a short-term support at 15400. If the index falls below 15350, we will shift our focus to the lower support at 15100. On the upside, a next target is 15630.

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Here Is When The Fed Could Signal Tapering – But Not Today

April 28, 2021/in General News & Updates /by MaimarFX

The FX market appeared to be taking a breather at the beginning of the week with market participants cautious ahead of today’s Federal Reserve policy decision. Consequently, there was nothing to gain for FX traders but this could possibly change today with traders bracing for higher volatility around the Fed’s statement.

The Federal Reserve is expected to announce it will begin trimming its monthly asset purchases before the end of the year but it will leave asset purchases untouched for several more months.

Nonetheless, the most likely scenario is that today’s FOMC decision will be an uneventful one since Fed President Jerome Powell is unlikely to hint at the timeline for tapering at this meeting, given that U.S. economic data has only just begun to pick up momentum and the U.S. Treasury market has calmed. But as the economic recovery continues, the Fed could soon send a signal.

In the unlikely event of a hawkish signal during Powell’s press conference or if he provides any clues about the tapering timeline, we will get a strong market reaction with the U.S. dollar rising. However, the Fed is not expected to follow the Bank of Canada that surprised the market with a hawkish tilt last week.

As for the tapering, most economists expect a taper to happen in the first quarter of next year with the Fed starting to signal tapering from the July semi-annual testimony.

EUR/USD: The pair remained in a tight trading range, increasing the chances for price breakouts to either side. For bullish momentum to accelerate we need to see a renewed break above 1.2115 or on the downside, a test of the current support zones at 1.20 or 1.19. If the pair remains however unable to overcome the 1.2110-barrier, chances are in favor of the bears with the focus being on the 1.1950-1.19-support zone.

GBP/USD: The cable failed to gather momentum and remained in a narrow sideways trading range between 1.3930 and 1.3850. If the pair falls below 1.3850, we will focus on a lower target at 1.38. A break below 1.3770 could even open the door to a deeper correction towards 1.3670. Sterling bulls on the other side, will have to wait for a significant break above 1.3930 and further 1.3960 in order to expect a higher target at 1.4070.

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No Surprises At The Fed’s Meeting?

April 26, 2021/in General News & Updates /by MaimarFX

The U.S. dollar started this week on a weaker note against other major currencies and Wednesday’s Federal Reserve policy assessment, which has held firm against hawkish expectations could even increase the pressure on the greenback, at least in the short-term. The Fed is expected to keep interest rates near zero and signal no change in their monthly bond purchases at Wednesday’s meeting. Fed Chair Jerome Powell has primed market participants to fear no surprises, so could it thus be a non-event for traders? Maybe, since policy makers refrained from providing further guidance on the conditions which would warrant a tapering of the central bank’s quantitative easing. However, speculative positioning could spur some volatility in USD crosses around the time of the Fed’s press conference.

On Thursday traders will watch U.S. GDP data which is forecast to show a 6 percent growth in the first quarter.

Let’s take a brief look at the technical picture:

EUR/USD

We currently see the pair breaking above 1.2110, the descending trend line, which could lead to further gains towards 1.2170 and 1.22. Bears, on the other side, may watch out for a break below 1.2030 that could result in a test of lower support levels at 1.1950 and 1.19. However, as long as the euro trades above 1.20, the short-term outlook remains bullish.

GBP/USD

The technical picture has not fundamentally changed with the cable remaining in a 200-pip range between 1.40 and 1.38. The outlook remains however bullish – provided the pair holds above 1.3770. An upside break above 1.40 would open the door to further gains towards 1.41 and 1.4250.