EURUSD only

woke up late and missed an entry, but no worries, fomc will sort out things

Tonight will be the night: the first FOMC press conference with Jerome (“Jay“) Powell as Fed chair. The rate hike is priced in. So what is interesting from the FX market’s point of view? In addition to all the detail the fundamental question is whether it will become clear that the Fed moves from “passive” to “active” interest rate policy. What does that mean?

• “Active“ monetary policy is what “old” people (who have consciously experienced the pre-2008 era) consider to be normal: real interest rates (nominal interest rates minus inflation expectations) fluctuate mainly because nominal interest rates fluctuate - driven by a monetary policy that largely anchors inflation expectations with the help of interest rate policy.

• “Passive“ monetary policy is what we have experienced for most of the time since 2008: nominal interest rates were largely anchored at the feasible lower bound close to 0%. Real interest rates fluctuated, but as a result of variation in the inflation expectations.
Central banks prefer the status of active monetary policy. That is the only way they can control inflation expectations and thus inflation rates. If the Fed had changed into “active” mode too quickly it would have risked a return to the lower-bound trap. That is why it was cautious. At the moment it is at the threshold towards a visible “activation” of its monetary policy. That is the main difference between the Fed on the one hand and the ECB or BoJ on the other. And it is relevant for USD exchange rates for two reasons:
1. In the short run, nominal interest rates are more important for USD exchange rates than real interest rates.
2. Central banks (in consensus with mainstream economists) assume that in case of rising inflation pressure they can steer real interest rates upwards (with the help of rate hikes) so that they should over-compensate for any inflation pressure with their nominal interest rates. There are doubts amongst FOMC members and in academia whether this point of view is correct. We have to leave it to future scientists to clarify that question. As long as the majority of market participants consider real interest rates as one of the Fed’s policy variables (rather than as an exogenous factor) a move to active monetary policy would also mean: there is the expectation of a rise in real interest rates.

One other important message to take from Powell’s press conference: over the past few months news flow from the White House has had significant effects on the USD exchange rates. It may have been one reason for the USD weakness seen in December and January. If the Fed was to become part of the administration’s “drain-the-swamp“ counter revolution that would be the end of active monetary policy. Such policy hurts the real economy and is never what governments want. So what will also matter tonight is what impression the Trump-nominated Powell leaves as regards his independence from the White House.

Admiral Markets

evolve.markets

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removed tp, lets see how high it can go

hello all, did anybody mentioned that open price was not tested? this could make the nice sell trade

WOW! Some really interesting points in this post!

1.
Distilled: “Active“ monetary policy is real interest rates driven by a monetary policy.
Interest rate manipulation anyone?? Think LIBOR. Why are we not upset about the CBs controlling interest rates?

Not Convinced?: Who wouldn't want to control something you could profit from, right?

2.
Distilled: “Passive“ monetary policy is Real interest rates fluctuated, but as a result of variation in the inflation expectations.
Can you say Free Market. This is CBs in 'hands off' mode. Well, as hands off as they get! (don't forget the massive money printing which benefited who??? Central Banks shareholders: THE MEMBER BANKS)

I do however think 'drain-the-swamp' would have long term benefits. It is always a good thing to remove corruption from government. It is like removing ticks from a dog. They are of no benefit to the dog and only do harm. Even if it is still a dog when you are done.

I also think 'Active' monetary policy is inevitable as long as CBs control the money supply. They will always do what benefits themselves. I say, "Remove the ticks!!!".

I should add that I believe there are ticks in all political parties. None are excluded!

Karen Jones, head of technical analysis at Commerzbank, suggested that the weekly closing below 1.2165/55 could hint at the idea that the pair formed a top around 1.2550. "EUR/USD broke through a three-month support line at 1.2265, which protects the more important support area at 1.2165 / 55. The latter includes the peak of mid-January, the current March low and the upward trend of 2017-2018. A weekly close below this area will add weight to the idea that the market recently formed a peak at 1.2556. It needs to overcome the resistance line at 1.2375 to refute this idea and test last week's high at 1.2413, followed by the current March high at 1.2447. If the level of 1.2447 is unexpectedly exceeded, the January and February highs at 1.2538 / 56 will be in the spotlight. When breaking above the resistance line of 2008-2018 at the level of 1.2651, the path to the level of 1.3190 will open, where 50% of the Fibonacci correction of the fall from the peak of 2008 is located," the analytic repeated.

Quick H4 Outlook

Yesterday we broke below 1.2340/13 zone and here we are just below our good old 1.2293 level.. Chart speaks for itself: Shifting slowly more and more below pivot (blue area) and market still needs a breakout from the expanding channel (thick lined green-red channel on chart).. FED might do nothing but time will show..

Stay Green

Here is the templet of my magic shapes for D1
I agree it was a perfect setups and it goes right as it should be

For me, may to see it as the attached picture.
May be who knows, but it will be perfect if it happens as it was for bears yesterday
please pay attention for the red zones

H 1 macd showing postive . now long at 1.22775

DOWN from now, looong way down /1.1900 as my total target/

Hey mates what about this

After a volatile start to the year, the ATR on the weekly chart has been low in March.
Is Today the day volatility returns?

Could see a 1% move in either direction, imho. Today might be a good time to keep
the stops tight and let the winners run.

before fomc, and it also expains why the drop stopped yesterday

Hi, Am I reading that correctly...a 1.5 spread on EU?

Running today shorts from 1.2285. In my view it'll hit 1.2160. A rate hike is expected. It'll give good push for a stronger dollar at least for very short period.

Some of the best analysis provided in the thread. Very good job guys. Appreciate your works.