4 January, 2018
The latest FOMC minutes have given the bulls something to be happy about, as the FED once again looked to keep the pace of rate hikes in the near future. There were some key takeaways from the meeting and the most pressing was that FED officials expect inflation to rise to 2% in the medium term as the Tax bill has a impact on the US economy. Expectations were also strong that pressure on the labour market as unemployment further drops would also help boost inflation expectations, and that potentially forecasting of inflation may also have been low historically. So with the FED looking forward in 2018 and Trumps man Powell about to come to the table we could potentially see some strong bullish moves from the FED with a strong US economy in front of them.
For the USD bulls it was positive across the board with large rises against all the major pairs, but mainly the European ones. For me one of the more interesting ones continues to be the USDCAD which lifted slightly, but is still lacking the momentum required to break out of the current bearish trend it finds itself in. So far traders will be watching to see if there is a bounce at support at 1.2427 to see if the bulls can come back into the market, otherwise they could be waiting until 1.2108 to see any sign of a solid bounce. If we see a push back higher 1.2628 and 1.2759 are likely to be the first key levels of resistance. However, the 200 day moving average is creeping down and likely to also act as dynamic resistance in the current market climate.
For me the main thing that keeps on going in the bullish American climate is the equity markets at present, and look no further than the S&P 500. It's getting hard to believe that there is an end, but at some point the bears will look to swipe. For now though, the Trump effect and the recent Tax reform coupled with a FED with positive forecasts is driving American companies higher than ever before and in the process lifting the S&P 500 higher than ever before. Most weeks we are seeing a new record high at present, but that being said uncertainty could be the instability that shakes the bulls off the top for a bit.
On the charts, and as previously stated, the focus would ideally be on psychological levels - as the market continues to rise it will look for these points. I would anticipate that markets will continue to look for key levels at 2725 and 2750 if the bulls look to push higher. Any swings lower are likely to get held up at 2700 as it acts as support in the current market. However, a push through would be treated with concern as generally speaking the 2600 and 2500 level were previously very good at holding back the bears.
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