Global macro overview for 27/09/2017:
In her yesterday’s speech, the Federal Reserve Chair Janet Yellen said raising interest rates gradually is the most appropriate policy measure amid uncertainty over the pace of inflation. In her opinion, it would be «unreasonable» to wait with hikes until inflation rises to 2.0%, and the Fed should be careful not to change policies too slowly. Yellen is convinced that inflation will be higher, that she has admitted she is expecting an overshoot of the projected inflation level. These were strong words that send a signal to the market not to pay too much attention to recent weak inflation readings.
As expected, Fed Chairman Janet Yellen yesterday did nothing to close the door to a December interest rate hike. On the contrary, it maintained the relatively hawkish tone continued after last week’s FOMC conference.At least the Fed is not going to worry about it and prefer to normalize its policies based on other strengths of the economy (growth, labor market, still loose financial conditions). The US economy is in good shape, even with the effects of hurricanes, the Fed is clearly aiming for a December interest rate hike.
Today we will hear from other FOMC policymakers, Brainard and Bullard, where the market participants can expect the more dovish tone of the statements. Even if it would hurt the US Dollar, then surely on the market there are no shortage of investors waiting for a temporary weakness of USD to refresh the long positions.
Let’s now take a look at the US Dollar Index technical picture at the H4 time frame. The market is approaching the key technical resistance zone between the levels of 93.35- 93.65. There is still no sign of a negative divergence, so any breakout through this zone will directly expose the next technical resistance at the level of 94.16.