Originally published by AxiTrader
The Fed's FOMC statement this morning reinforced the committee's positive outlook for the US economy and continued to signal that the Fed is on the path to another rate hike this year and then perhaps 3 hikes in 2018.
Indeed there is no denying the positivity of the first sentence of the FOMC statement in which the Fed said, "information received since the Federal Open Market Committee met in September indicates that the labour market has continued to strengthen and that economic activity has been rising at a solid rate despite hurricane-related disruptions”.
That is an unequivocally positive characterisation of the outlook. As a result expectations of a December hike rose a couple of percentage points from already elevated levels in the mid 80% region while after an initial setback the US dollar caught a bid again.
That the Fed is signalling positive divergence between it and many other central banks across the globe would usually be a positive for the US dollar. But the news from various outlets that President Trump is set to pick Jerome Powell as the next Fed chair and the synchronisation of global growth tempered traders enthusiasm.
Whether the euro, or DollarAsia can continue to ignore the differing paths once we see both the tax plan and non-farm payrolls in what's left of the week is an open question.
But for the moment USD/KRW strengthened to the lowest level since late August at 1108 yesterday. While the Chinese yuan was also bid with USD/CNY breaking down and through a fairly steep uptrend as the PBOC fights to keep the Chinese 10 year below that crucial 4% level I highlighted yesterday.
Here's the USD/CNH chart which suggests a dip toward 6.55/56 for USD/CNH.
It is an interesting time for DollarAsia and I'm watching theUSD/SGD rate as the overall bellwether for the region. It had an important pin bar high and reversal last Friday night when the US dollar was at its zenith after the GDP data. But it has since pulled back and USD/SGD is back toward important trendline support. I'm watching 1.3560/70 really closely - here's the chart.
Turning to economics now and while the Chinese Caixin PMI for October came in as expected as yesterday with a print of 51 the rest of the region saw month on month falls when the data was released.
That has some folks talking about the chill winds of the Chinese pollution clamp down have a tail effect on the production and manufacturing across the region. I'm not sure. Perhaps it's simply that the globe is growing just not as fast as it was a couple of months back. That seems to be the picture I'd paint after seeing the global PMI's yesterday and the US ISM.
Tonight's German and French PMI's will be interesting in that regard as will the release of the Nikkei ASEAN PMI today.
Looking at stocks it should be another good lead for the region's bourses today after the S&P 500 and Dow Jones Industrial Average both moved higher. But the fact they were off their highs, and the fact that indexes such as the China A50 had a big pin bar - possibly reversal - yesterday gives me pause.
Certainly, the Nikkei 225 loves the weaker yen, but when I look at the stall in the Hang Seng - which has traded inside an 800 point range for the best part of 4 weeks now, and I look at the China A50 I just wonder.
Clearly, this China index is still in an uptrend. But is it time for a pause to refresh the outlook? While below yesterday's highs the targets would be 12,526 and 12,275. Here's the chart.
Have a great day's trading.