FED: Core Of FOMC Leadership On Dovish Side Of 2026 Median (2/2)
Jan-06 18:21
Continuing on with the dovish end of the table:
- 4 End-2026 Dots At 3.125%: We think this level (suggestive of 2x 25bp cuts this year) contains key FOMC leaders Powell and Williams, with Jefferson alongside though Williams is probably the biggest risk to a higher Dot (he said on Dec 19 "I don't personally have a sense of urgency to need to act further on monetary policy right now because I think the cuts we've made have positioned us really well"; possibly he could be swapped with Paulson though we tend to believe he and Powell are closely aligned on getting rates down toward 3% over the coming quarters. Daly's inclusion here on the dovish side of the median reflects her apparent concern over the labor market going into the December meeting though we haven't heard from her since.
- 2 End-2026 Dots At 2.875%: Both Goolsbee and Waller have suggested they are in the 2.9-3.1% range for end-year rates. Goolsbee said on Dec 12 that despite his December dissent, "if you look at the dot plot, I'm one of the most optimistic folks about how rates can go down in the coming year", pointing to a figure lower than the median (and implies that he envisaged fairly aggressive cuts this year to the tune of 100bp when he filled in his Dot Plot). Gov Waller said on Dec 17 that his 2026 rate dot submission was below the FOMC median at "about three", saying "maybe we're 50 to 100 basis points off of neutral" - we split the difference and put him at 75bp of easing.
- 1 End-2026 Dot At 2.375%: We haven't heard from Gov Bowman in a while but as one of the biggest advocates of rate cuts on the FOMC we assume she is well below the median voter for end-2026 rates.
- 1 End-2026 Dot At 2.125%: We know Gov Miran had a 2.1% end-2026 rate in his projections, because he told MNI on Jan 5 that he penciled in an implied 150bp of rate cuts in December's projections vs 100bp in his September forecast. “My previous dot was preconditioned upon the Fed pursuing the right policy, and as long as we keep policy at what I think of as materially too tight, we're reducing my growth expectations in the future,” he told MNI. “That requires looser policy now to offset that.”
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USDCAD TECHS: Bull Channel Breakout
Dec-05 21:00
- RES 4: 1.4140 High Nov 5 and a key resistance
- RES 3: 1.4131 High Nov 21
- RES 2: 1.4051 High Nov 28
- RES 1: 1.3939/4016 Low Nov 28 / 20-day EMA
- PRICE: 1.3865 @ 16:35 GMT Dec 5
- SUP 1: 1.3853 Intraday low
- SUP 2: 1.3840 50.0% retracement of the Jun 16 - Nov 6 bull cycle
- SUP 3: 1.3812 Low Sep 23
- SUP 4: 1.3779 Low Sep 22
A bear theme in USDCAD remains intact and Friday’s strong sell-off reinforces a bear theme. The pair has breached an important support at 1.3942, the base of a bull channel drawn from the Jul 23 low. The break highlights a stronger bear cycle and signals scope for an extension towards 1.3840 next, a Fibonacci retracement point. Initial firm resistance to watch is 1.4016, 20-day EMA.
LOOK AHEAD: US Week Ahead: FOMC Decision Dominates, Post Shutdown Data Catch-Up
Dec-05 21:00
- Next week’s US calendar is dominated by the FOMC decision on Wednesday, with a third consecutive 25bp cut almost fully priced.
- Expect it to be a contentious meeting however, with many arguing for a pause not least whilst they’re still relatively in the dark on key official data releases following the government shutdown.
- Fed Chair Powell opted for a surprisingly hawkish tone at the late October press conference, highlighting a deeply divided committee on prospects for another cut in December.
- The “fog” had appeared to win out until NY Fed’s Williams, a senior permanent voter, gave unusually explicit guidance on still seeing room “for a further adjustment in the near term”. With no pushback from FOMC members or media briefings, it appears this message has approval from the core of the FOMC which should be enough to see a rate cut this month. The likely catalyst was the further increase in the unemployment rate to 4.44% back in September, although subsequent tracking suggests stabilization and jobless claims data don’t show any signs of deterioration.
- We’ll be looking for the number of hawkish dissents (we’d be surprised if anyone joins Miran dissenting for a 50bp cut) and expect a greater number to object to a cut in the 2025 dot plot, whilst the distribution of dots for 2026 should be in greater focus.
- As for the economic projections, we expect upward revisions to GDP growth but downward revisions to near-term core PCE inflation with tariff passthrough proving less severe than previously feared.
Aside from the Fed, we also receive two months worth of JOLTS data along with other delayed releases as the shutdown data backlog is slowly caught up.
AUDUSD TECHS: Bullish Impulsive Wave Extends
Dec-05 20:30
- RES 4: 0.6723 High Oct 21 ‘24
- RES 3: 0.6707 High Sep 17 and a key resistance
- RES 2: 0.6660 High Sep 18
- RES 1: 0.6649 Intraday high
- PRICE: 0.6630 @ 16:32 GMT Dec 5
- SUP 1: 0.6580/6533 High Nov 13 / 20-day EMA
- SUP 2: 0.6517 Low Nov 27
- SUP 3: 0.6466/21 Low Nov 26 / 21
- SUP 4: 0.6415 Low Aug 21 / 22 and a bear trigger
A strong impulsive bull wave in AUDUSD remains intact, having printed 10 consecutive sessions of higher highs. Recent gains have cleared a number of important short-term resistance points, strengthening a bull theme and highlighting scope for a continuation higher. Today’s rally has resulted in a breach of 0.6640, 76.4% of the Sep 17 - Nov 21 bear leg. This opens 0.6707, the Sep 17 high and key resistance. Key support to watch is at 0.6533, 20-day EMA.
