Post a historic day for FOMC


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Daily Outlook – 28 August 2020

By: Andria Pichidi

  • FOMC announced a shift in its monetary policy strategy, moving to an average inflation target. now seeks inflation that averages 2% over time.
  • Though the outcome was widely expected, the timing surprised. – many assumed it would be outlined at the September FOMC, along with the SEP.
  • On employment, the Fed will assess “shortfalls of employment from its maximum level.” The Fed noted its prior wording noted “deviations from its maximum level.” The Fed will undertake a policy review every five years. – did not set a numerical target on unemployment.
  • Wall Street surged and the Dow climbed into the green for the year. But profit-taking on the highs set in through the afternoon, especially on the hot tech sector. An upwardly revised Q2 GDP report and a decline in initial jobless claims data were overshadowed by the Fed
  • Treasury yields have moved higher, Stock markets traded mixed with Japanese markets hit by a report saying that Prime Minister Abe will resign due to health reasons. – Nikkei has lost -1.4%, DAX and FTSE 100 futures are up, and USA500 stalled at 3,508
  • New virus numbers continue to rise in several European countries and restrictions will hit hospitality and travel companies once again.
  • German GfK consumer confidence unexpectedly fell back to -1.8
  • German import price inflation lifted to -4.6% y/y
  • USD fell after Powell indicated the Fed would change its inflation targeting, allowing CPI to rise above the 2% target for a time. As a result, interest rates are set to remain close to zero for a long time.

EUR – topped at 1.1879, with R1 at 1.1898

GBP – higher, supported by 1.3200 handles, and currently at 1.3260 retesting again 7-month Resistance.

JPY – fell from 106.94 to 106.10 (also PP level) as the dollar gets weaker on the FED aftermaths

CAD – dipped from 1.3160 highs to 1.3078. Next Support is at 2020 lows 1.2940-1.3030 area.

AUD – extended to 0.7300 ( 2020 AND 2019 HIGHS)

USOIL – declined as Hurricane Laura weakened while crossing over land and the front end WTI future is marginally above USD 43 per barrel.

Gold – reversed some losses and is close to $1,950 area.

Tesla – will do a 5-for-1 stock split. The split takes effect on August 31, next Monday. – Tesla is one of the best-performing stocks this year. From the low of this year to recent high, it’s up from $350 to $2,295 per share, more than 650%

TODAY: Jackson Hole day 2 with focus on BoE’s Gov Bailey. On a data perspective, the Canadian GDP is the most significant release of the day.

Biggest mover (AUDUSD +0.60%) – pegged to nearly 2-years peak at 0.7300 area, as the relatively high beta dollar bloc currencies have been outperforming. Intraday however is looking OB as it closed outside BB for 7 consecutive hours. But momentum indicators on the other hand suggest that there is further steam to the upside with RSI ay 72 and MACD lines extending above the signal line. Fast Mas also aligned higher .1H ATR at 0.0011 and Daily ATR at 0.0060

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