Fed paused and markets cheering

Unsurprisingly, the Federal Reserve left the current policy unchanged, while Chair Jerome Powell hinted that the US central bank may now be finished with the most aggressive tightening cycle in four decades.

In the press conference, Powell said “The question we’re asking is: Should we hike more? Slowing down is giving us, I think, a better sense of how much more we need to do, if we need to do more.”

The Fed Fund Futures for December’s meeting declined further to 19%, down from 27%, while January’s probability also declined from 41% to 27% after the decision, in a clear sign that markets are pricing in less and fewer chances for one more rate hike, leading to a market rally across the three major indices.

In short, the Fed is trying to say that we don’t think we will have to do much more from here, and Powell sounded confident that the Fed has done a lot.

The Dollar Index remains below 106.80

The Dollar Index edged higher briefly above 107.0 before declining back all the way to 106.35, confirming that the 106.80 resistance level remains solid. This also confirms the bearish outlook of the time and price method, which still suggests that, as long as the index continues to trade below the mentioned resistance area, a deeper decline might be more likely.

In the meantime, the next support area stands at 106.15 followed by 106.0, while a break through those levels would clear the way for further declines towards the 105.65 support area.

EURUSD holding above support

EURUSD declined earlier yesterday to as low as 1.0517 but managed to bounce back and recover after the Federal Reserve decision. The rally continued in Asia towards 1.0600.

Such a move continues to support the bullish outlook of the time and price method mentioned a few days ago and holding above 1.05 remains the inflection point.

In the meantime, the next resistance stands at 1.0650, while a break above that resistance would clear the way for further gains towards 1.0690.

Bank of England’s decision ahead

The Bank of England might hold rates unchanged at 5.25% which is the highest interest rate since 2008, especially with the mounting evidence that the UK economy, labor market, and inflation are weakening.

What matters the most is the votes and the forward guidance. The recent economic data might lead to a shift in views on the MPC, but they are likely to repeat that policy will stay sufficiently restrictive for a sufficiently long time to get inflation back under control.

In short, the Bank of England might not be very hawkish, but rather keep the door open for further hikes if needed, depending on the upcoming data.

GBPUSD needs more time

GBPUSD continues to hold the 1.2100 support area since Oct 20^th. However, the time and price method suggests that the pair might need a little bit more time until it confirms a new bullish trend.

On the other hand, the pair needs to stay above the 1.2100 support area until mid-November, in order to start developing a new bullish trend. Otherwise, another leg lower is more likely.

Currently, the next resistance area stands at 1.22, while a break above that resistance may lead to another push higher towards 1.2260.

On the downside view, a break below 1.21 would lead to a deeper decline towards 1.2035 followed by 1.20 and possibly 1.1965.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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