Euro: USD/EUR (EUR=X) July Rate Cut Expectations Drop Following Fed Speeches

Euro: USD/EUR (EUR=X) July Rate Cut Expectations Drop Following Fed Speeches

Euro: USD/EUR (EUR=X) July Rate Cut Expectations Drop Following Fed Speeches

Fed member speeches confirmed that the Fed is indeed ready to cut rates, just not at the pace that the markets believe it will. Powell held his stance that the Fed will act to sustain the recovery, similar to his rhetoric at the Fed meeting last week.

While there was a lot of focus on Powell’s speech, it was Fed member Bullard that surprised the markets. Bullard is a known dove and had voted to cut rates last week. Yesterday he said that a 50 basis point cut would be overdoing it. He also referenced a near-term cut as an ‘insurance’ cut which hardly signals the start of a broader easing cycle. It is unlikely that any other members will consider a 50 basis point cut if Bullard is not behind it, as he is considered the most dovish voting member of the Fed.

The futures markets have adjusted expectations somewhat. Yesterday, the CME FedWatch tool indicated a 42% probability of a 50 basis point cut in July. Today, this figure had dropped to 26%. There is still some data scheduled for release in early July that might sway the minds of policymakers. However, after yesterday’s speeches, I think it is very unlikely that the central bank will make a move so aggressive.

Despite a lack of a clear signal that the Fed will move in July, the futures market continue to indicate a 0% chance that rates will remain unchanged in July. In other words, one rate cut remains fully priced in.

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 1.13.

The projected upper bound is: 1.15.

The projected lower bound is: 1.13.

The projected closing price is: 1.14.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 76.1908. This is not an overbought or oversold reading. The last signal was a sell 0 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 62.60. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 225 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 90. This is not a topping or bottoming area. The last signal was a sell 1 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 4 period(s) ago.

Rex Takasugi – TD Profile

FOREX EUR= closed up 0.000 at 1.137. Volume was 99% below average (consolidating) and Bollinger Bands were 40% wider than normal.

Open High Low Close Volume___
1.137 1.138 1.137 1.137 1,471

Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period     50-period     200-period
Close: 1.13 1.12 1.13
Volatility: 7 6 7
Volume: 60,404 92,046 128,768

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX EUR= is currently 0.3% above its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of EUR= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on EUR= and have had this outlook for the last 17 periods.

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