Daily thread to exchange ideas and to share your thoughts
The dollar is keeping slightly softer to start the day, continuing the post-Fed move after Powell & co. steered clear of any serious taper talk once again.
The meeting served as more of a placeholder for Jackson Hole and I reckon that and the weeks ahead will see the Fed start to give an unofficial nod to begin taper discussions.
Barring any major hiccups to the labour market and virus situation in the US, the timeline should see the Fed gear towards a formal announcement on tapering somewhere around November or December – the latter seems more likely.
As such, the dollar may not like what it heard yesterday but it isn’t anything much to dislike since the Fed remains “on track” for the most part.
Cable is trading back up above 1.3900 and its 100-day moving average so that is one to watch, though key resistance still lies closer to 1.4000.
USD/JPY is holding below 110.00 with the 100-day moving average a key support level to watch at 109.57. Meanwhile, USD/CAD is building some downside momentum on a push under 1.2500 – below the 38.2 retracement level of its recent upswing too @ 1.2501.
Equities are tepid though US stocks did squeeze some gains yesterday as the overall landscape remains unchanged for the most part.
The bond market is an interesting one though with the series of lower highs and lower lows in yields still in tact. The Fed’s communication yesterday does little to shift things.
As such, be wary of the reaction in yields in the weeks ahead as that may have wider implications on risk and FX in general (yen pairs in particular).
As for trades, I still favour maintaining oil longs for a retest of the early July highs, AUD/NZD shorts close to 1.0600 as the level holds up again, and CAD/JPY longs (structural positioning) on any pullback towards the April lows.
For dollar pairs, cable is one to watch as a break of 1.4000 may set up a retest of 1.4200 while failure to breach 1.4000 could see a drop back so that is an interesting level to watch.
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