US TSYS: Risk Sentiment Improved, Pres Trump Opens Door on China Trade

• RES 4: 0.8769 High Jul 28 and the bull trigger   
• RES 3: 0.8744 High Aug 7 
• RES 2: 0.8728 76.4% retracement of the Jul 28 - Aug 14 bear leg
• RES 1: 0.8713 High Sep 2  
• PRICE: 0.8674 @ 20:33 BST Sep 17
• SUP 1: 0.8640/8597 50-day EMA / Low Aug 14 and the bear trigger
• SUP 2: 0.8562 50.0% retracement May 29 - Jul 28 upleg 
• SUP 3: 0.8540 Low Jun 30 
• SUP 4: 0.8514 61.8% retracement May 29 - Jul 28 upleg

The recent pullback in EURGBP appears corrective and Tuesday’s rally signals the end of the corrective phase. Support to watch lies at 0.8597, the Aug 14 low. Clearance of this level would cancel a bull theme and reinstate a recent bearish threat. For bulls, a stronger resumption of gains would open 0.8744, the Aug 7 high. Key resistance and the bull trigger is at 0.8769, the Jul 28 high. First support is 0.8640, the 50-day EMA.

• The initial reaction to the Fed’s 25bp rate cut and dovish adjustments to the statement was a sharp selloff for the US dollar. This marked a continuation of the recent theme of greenback weakness and prompted the USD index to briefly break to the lowest point since February 2022. Most notably, this propelled EURUSD to a high of 1.1919.
• However, a confident sounding Chair Powell on the US economy as a whole and the mixed messages within the summary of economic projections questioned the overall dovish narrative and subsequently the US dollar aggressively reversed higher alongside US treasury yields.
• The USD index rallied around 0.8%, with the likes of EURUSD and USDJPY reversing nearer to 1%.
• For USDJPY in particular, the false break below the bear trigger of 146.21 places a significant focus on today’s daily close and whether bearish momentum can be sustained for the pair. Markets will be aware of the risks surrounding the LDP leadership and Friday’s BOJ meeting.
• EURUSD rose to a high of 1.1919, within four pips of the 2.00 proj of the Feb 28 - Mar 18 - 247 price swing. Separately, GBPUSD traded as high as 1.3726 before trading back to 1.3650 as we approach the APAC crossover and tomorrow’s BOE meeting. Cycle highs for cable reside at 1.3789, the July 1 and key resistance.
• New Zealand GDP and Australian employment data kick off the Thursday calendar, before the focus turns to Norges bank and BOE decisions.

MNI's Jean Yung concludes the press conference, asking Powell about how he views inflation expectations, and whether fiscal deficits and the debate over Fed independence are boosting those expectations. Powell says:

• "Shorter term inflation expectations have tended to respond to near term inflation. So if inflation goes up, inflation expectations will predict that it takes just a little while to get back down. Fortunately, throughout this, this period, longer term inflation expectations, both breakevens in the markets and almost all of the longer term surveys, Michigan being a bit of an outlier lately, have been just rock solid in terms of running at levels that are consistent with 2% inflation over time. So we don't take that for granted. We actually assume that our actions have a real effect on that, and that we need to continually show and also mention our commitment to 2% inflation. And so you'll hear us doing that."
• "The latter part of your question was about independence. I don't see market participants.... I don't see it as something they're factoring in right now in terms of setting interest rates."