FED: Statement: Uncertainty Still Elevated (4/4)
Going paragraph by paragraph through the previous (May) statement opening paragraphs in italics:
- The opening paragraph of the Statement may as usual be marked-to-market, but the previous edition’s description of the economy largely still stands. We would be surprised if the Fed described labor market conditions as anything but “solid”, or inflation as anything but “somewhat elevated”.
- A change to either would almost certainly lean to the dovish side, with recent inflation data surprising to the downside and broad labor market indicators cooling, but it’s unlikely the FOMC would want to send such a signal this month.
- There probably hasn’t been enough evidence in the “hard” data to refer to economic activity as running at anything but a “solid” pace, though a tweak here to something like “moderate” is possible and probably not impactful. There may also be an adjustment of the language on “swings in net exports”, though this continues to be useful given the inventory/net export swings between Q1 and Q2.
- With a tentative US-China trade deal in place, it’s likely that the second paragraph will remove references to uncertainty and risks having risen, merely saying perhaps that they are/remain elevated.
- The Fed could at some point alter its assessment of the balance of risks to suggest that they are concerned that one of the dual mandate goals needs to be addressed at the potential expense of the other, but that would require much clearer evidence in the data.
- For an FOMC that is waiting to see the impact of tariffs and other policy shifts, even as it maintains its overall easing bias, a shift in forward rate guidance (“in considering the extent and timing of additional adjustments…”) looks unlikely at this juncture.
- No dissents are expected. In the Implementation Note, no changes to the administered rates are expected.
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USDCAD TECHS: Bearish Trend Condition
- RES 4: 1.4296 High Apr 7
- RES 3: 1.4111 High Apr 4
- RES 2: 1.4026 50-day EMA
- RES 1: 1.4016 High May 12 / 13
- PRICE: 1.3985 @ 19:49 BST May 16
- SUP 1: 1.3814/3751 Low May 8 / 6 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 ‘24
- SUP 4: 1.3643 Low Oct 9 ‘24
USDCAD maintains a firmer short-term tone for now. Despite the latest move higher, the trend condition remains bearish and recent strength is considered corrective. A fresh cycle low on May 6 reinforces the bearish theme. A resumption of weakness would open 1.3744, a Fibonacci retracement. Note that moving average studies are in a bear mode position, highlighting a dominant downtrend. Key resistance is seen at 1.4026, the 50-day EMA.
AUDUSD TECHS: Trend Needle Points North
- RES 4: 0.5682 High Nov 12 ‘24
- RES 3: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 2: 0.6528 High Nov 29 ‘24
- RES 1: 0.6515 High May 7
- PRICE: 0.6404 @ 19:46 BST May 16
- SUP 1: 0.6354 50-day EMA
- SUP 2: 0.6275 Low Apr 14
- SUP 3: 0.6181 Low Apr 11
- SUP 4: 0.6116 Low Apr 10
The trend condition in AUDUSD is unchanged, it remains bullish and recent weakness is considered corrective. The May 13 rally signals the end of the corrective pullback and attention is on key resistance at 0.6515, the May 7 high. Note that moving average studies remain in a bull-mode position, highlighting an uptrend. A resumption of the trend would open 0.6550, a Fibonacci retracement. Key support to monitor is 0.6354, the 50-day EMA.
EURJPY TECHS: Monitoring Support At The 50-Day EMA
- RES 4: 167.40 61.8% retracement of the Jul 11 - Aug ‘24 sell-off
- RES 3: 166.69 High Oct 31 2024 and a key resistance
- RES 2: 166.10 High Nov 6
- RES 1: 165.21/43 High May 13 / High Nov 8 2024
- PRICE: 162.66 @ 19:43 GMT May 16
- SUP 1: 162.21 50-day EMA
- SUP 2: 161.60 Low May 6
- SUP 3: 160.99 Low Apr 22
- SUP 4: 159.48 Low Apr 9
EURJPY has pulled back from its recent high. The move down is for now, considered corrective. The latest bullish extension paves the way for a climb towards 165.43, the Nov 8 ‘24 high. Moving average studies are in a bull mode position, highlighting a dominant uptrend. Support to watch is 162.21, the 50-day EMA. A break of this level is required to signal a possible reversal. This would open 161.60 initially, the May 6 low.
