No rate change on Wednesday's FOMC meeting - Nenad Kerkez, Admiral Markets

NENAD KERKEZ
PROFILE
• Current Job: Analyst and Full Time Trader at Admiral Markets
• Career: Holds a MSc Degree in Economics at the John Naisbitt University (formerly known as Megatrend). Works as Senior lecturer and market analyst for Admiral Markets

View profile at FXStreet

Nenad Kerkez is an analyst and trader who has been in the market since 2008 and works closely with Admiral Markets as their Head Lecturer and Market Analyst. He is well known in the FX Community, ranking in the top 10 traders and analysts in the Forex Factory High Impact Members Ranking.

Nenad covers over 25 currencies on an intraday basis and has a Masters in economics. He also developed CAMMACD TM, a proprietary trading and analysis strategy. Further, he is the co-founder and head of Elite Currensea Trading, an educational website for currency traders.

The GBPUSD is back to 1.4320 after declining 120 pips from Friday’s high at 1.4440; do you expect a bounce after consolidating above 1.4300 or do you see further drops?

As I have explained  in the yestarday’s GBPUSD article as long as 1.4115 is the support we might expect a bounce. We can see a fake out candle on H1 chart (see the chart) that suggests buyers above1.4115. Comparing the history to now moment, we might see a another leg of buying if 1.4115 zone is retested but for another stronger momentum to the upside GBPUSD should have 4h close above 1.4300.

What do you expect from the Federal Reserve this Wednesday?

Market consensus anticipates no rate change on Wednesday’s FOMC meeting, despite strong employment data of recent, Eg Unemployment rate at 4.9% and NFP last at 242k.  This is largely due to inflation data still not meeting its policy objective, but also, we had further monetary policy divergence with the EU trading zone of recent.  I do not expect the US FRB to make any changes to the US cash rate, but I expect a neutral tone on future rate hikes that will largely be subject to meeting the inflation objectives of the USFRB.  A recent rally in Commodities prices may start to place cost pressures to the manufacturing/production cycle, which could lead to price rises in final goods and services of the US economy and inflation may follow, needless to say, this is a pretty loose link to cause inflation.

The EUR/USD started the week with losses after declining below 1.1100; do you think the Euro could fall as much as pre-ECBlevels?

EURUSD made a huge spike to the upside that was accelerated with stop a grabber above 1.1115. Every big move needs a correction as prices needs to stay in equilibrium. We might see a deeper correction but1.1050-30 should stay strong if EURUSD wants to keep the upside bias. It will depend much on FOMC meeting tomorrow, so pay attention to the statement. FOMC statement tomorrow will give a guidance to near term economic projections andas well as cues about now future rate hikes. As I already said I expect a neutral stance with no change to the US cash rate.

Gold is declining for the second day as the yellow metal is trading below  USD1,250/oz; do you see a top at Friday’s highs at 1,284, or do you expect further gains?

The spike in the Gold price has largely been due to risk-off sentiment coupled with loose Monetary Policy implementation across the Globe.  When yields on Fixed Income drop due to monetary policy loosening, it means that the cash returns are lower for investors; providing less incentive to switch from risky assets (Eg Equities orProperty) to lower risk assets in Fixed Income (Eg Government Bonds, HighCredit Rating Corporate Bonds, etc) during risk-off sentiment.  Hence, funds are allocated to Gold, which has served as an asset, like a currency, but usually appreciates most during inflation or when risk-off sentiment is high. I do not anticipate tightening of monetary policy in the US this month,so this should benefit the Gold price in the short term, and I am not totally convinced that we have seen the bottom of Equities prices this year yet.  If you look at the Gold price, it has recently broken through the downtrend channel which it has been in the last 3years,  it has also made a new interim high, a first for the last several years, and to me this is a signal that we may have a change in the price to the upside.