February 23rd Morning Brief – Renewed Fed Rate Hike Sentiment

Dave Green•Thursday, February 23, 2017•2 min read

Today marks a new trading day that begins with the renewed rate hike sentiments. As discussed in our 22nd of Feb Morning Brief, the investors awaited FOMC meeting minutes before taking any major trading decision. The volatility remained low throughout the Asian and European trading sessions. Afterwards, however, the traders jumped in the market on the FOMC meeting.

Key Points of FOMC Meeting Minutes – Renews FED Rate Hike Sentiment

Inflation, a Measure of Economic Growth

We know that the inflation target of the United States is 2% and they currently reached 1.6% last year. They are very close to meeting their interest rate target. In my opinion, it's a good time to hike the rates and that's what all the investors in the market must be thinking. So, they are trading the Greenback with a bullish bias.

Unemployment Rate, a Measure of Labor Market

The U.S economy has lowered their unemployment rate target from 5% to 4.5%. At the moment, their unemployment rate is below their previous target of 5%. It's another reason to hike the rates.

5 Major Economic Events Today

USD: Treasury Sec Mnuchin Speaks
USD Unemployment Claims
USD Crude Oil Inventories
USD FOMC Member Kaplan Speaks
AUD RBA Gov Lowe Speaks

EUR/USD, the Top Traded Currency Pair

Today, the EUR/ USD is trading unchanged at $1.0558 following volatile trading sessions. Investors are taking a breather before getting into the market. Let's have a look at the fundamental side of the pair.

This month, the economists have observed an improvement in a sentiment of the German managers. Yesterday, the economic figure released by the IFO Institute for Economic Research showed that the Business Climate Index has expanded to 111.0 points in the month of February, beating the previous figure of 109.9. It's a leading indicator that represents the economic health and business conditions.

EURUSD Chart

However, the technical side of the pair is still bearish. The leading indicator RSI is holding at 44, right below a crossover level of 50. As we know, an RSI value below 50 indicates a bearish tone of the pair. Besides that, the 50 periods EMA is also pushing the pair deeper.

At this moment, the pair is trading in a narrow trading range of $1.0570 – $1.0539 and the breakage of this range is likely to determine the trends. Investors are recommended to look for $1.05390 as the breakage of this level is likely to give us a selling trade with a target of 30 pips.

USD/ JPY, the Confused Currency Pair

Yesterday, the safe haven currency, Japanese Yen, lost its appeal after the hawkish tone of the FOMC meeting. Investors usually switch their investments from one currency to the other, increasing the demand for the one currency while reducing the other. Today, I don't see any major fundamentals that can impact the single currency Yen, but high impacted economic events from the U.S has a potential to give a direction to the choppy market.

USDJPY Chart

Currently, the USD/JPY is trading neutral at $113.250, maintaining a trading range of $113.550 – $113.100. Besides this, it has also formed an asymmetric triangle pattern in the 1 – hour time frame. Lastly, the EMA's are also trading flat, giving no signal of a buying or selling trend.

Guys, keep your focus on the symmetric triangle pattern as the breakout will give us a clear cut trade. It's more likely in the New York trading sessions as I don't see any volatility in the European sessions.

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