Dollar Falls On Fed’s Split About Inflation !

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The U.S dollar fell after the minutes of the U.S  central bank’s last policy meeting on Sept. 19-20 which released on Wednesday. This development may suggest a new cycle for the USD in the upcoming days and possibly weeks.

Yesterday’s meeting can be summarized with these points:

1- A lengthy debate by policymakers about the possibility of rising inflation and slowing the course of future interest rate hikes.

2- The Fed would begin this month to reduce its large bond portfolio mostly amassed following the financial crisis and unanimously voted to hold rates steady.

Federal Reserve Chair Janet Yellen has repeatedly said since the meeting that there is a growing uncertainty over the path of inflation which has fallen from the Federal Reserve’s target rate of 2 percent in recent months.

3-Officials were still often optimistic about the economic impact of recent hurricanes.

4- Many participants expressed concern that the low inflation readings this year might reflect the influence of developments that could prove more persistent.

5- Many policymakers have said they will focus on inflation data coming in the next few months when deciding on future interest rate movements.

6- Many policymakers still felt that another rate increase this year “was likely to be warranted,” the Fed said.

Conclusion: Federal Reserve Chair Janet Yellen has repeatedly said since the meeting that there is a growing uncertainty over the path of inflation which has fallen from the Federal Reserve’s target rate of 2 percent in recent months.

However, Yellen and a number of other key policymakers have made it clear that they expect to continue to raise interest rates gradually due to macroeconomic strength and continued tightening of the labor market.

So, this development may bring limited losses for the USD, according to daily chart of U.S dollar index, the index printed a resistance 93.14 levels, stability below this level will keep the index under pressure with risk to the 92.30 levels, a halt is likely and it may turn higher from if seen resistance comes at the 92.67 levels, however; below 92.30 sees a fall risk to the 91.85 levels, further down, support stands at the 91.18 levels.

On the upside, resistance comes at the 93.14 levels, a daily closing back above that level should weaken recent fall and turn the focus on the 94.05 levels, a clear break above 94.05 is needed to prevent a return to the downside if seen the index will restore the upside momentum and aim the 94.95/95.57 levels.

Anyway; the dollar remains on the downside as long as the index trades below 93.14 levels.

Recommendations: selling the USD on rallies…

Data that needs to be watched :

1- US inflation data :

The U.S will report on producer price inflation today at 12:30 GMT, Analysts expect a rise 0.4%, from 0.2% a month earlier.

2- ECB President Draghi Speaks:

ECB President Mario Draghi will speak at an event in Washington at 14:30 GMT. Any signs of  QE tapering from Draghi may change the game 180, the EUR may decline strongly?!!!

3- U.S  crude oil stockpiles :

Analysts forecast crude inventories to rise by about 3.5M barrels in the week ended Oct. 6 (Rises -1.991M, from -6.023M). Today at 15:00 GMT.

Tomorrow the focus will be on U.S consumer inflation and retail sales data.

 

MARKET DATA

UPCOMING ECONOMIC EVENTS