Mark Wogan: Is Jerome Powell backing off?

Good morning traders.

Federal Reserve Chair, Jerome Powell was out on the wires yesterday evening suggesting that they have “no pre-set policy” path and rates are just below neutral. This sounded more dovish than his recent pronouncements and helped to ease USD rate projections and subsequently lifted the eurusd.

I mentioned the other week that Fed vice chair Clarida was sounding dovish on future rate projections and the closeness of the neutral rate. Now his boss has come out in tandem.

From a macro perspective this could be very significant as it could lead to a spate of covering of long dollar positions which in turn would help to keep the eurusd bid into the last month of the year.

On the other hand it could just be a rewording of his “long way from neutral” comments of last month, which to be honest did sound a little odd in the usual world of central bank precise language.

Maybe the market has got a little ahead of itself?

Whichever way we go in the longer term I´ll be watching how it performs at my levels especially as we have the FOMC minutes tonight which might provide a pullback.

We also have the G20 in the next few days where trade discussions will be keenly watched out for. If Trump and Xi find some common ground that allows them to back off the current ´trade war´ footing this will lift risk and help to alleviate further safe haven buying of the USD. If not we could resume USD buying and the Powell effect of last night might dissipate.

As always we stay vigilant.

The Daily Chart

The inverse head and shoulders we have been watching now looks like it has more of a decent chance of playing out. In which case we could be in for a test up to 1.1650 ish.

1.1450s will be the first major level on the way up.

The Hourly Chart

Support and resistance look pretty clear as noted.

Have a good day folks.