The second to the last meeting of the Fed this year was held without any surprises. The rate remained at the same level, and the statement was neutral, so the general fundamental background for dollar pairs did not change.
An uninteresting and uninformative meeting was actually ignored by the market. The euro-dollar pair fluctuated within the framework of the day-long flute in anticipation of more significant events. Today President Donald Trump should announce his choice regarding the candidacy of the post of head of the Fed. According to the Wall Street Journal, the White House has already notified Jerome Powell that the head of state has chosen his candidacy. Now it's up to the official procedure: first Trump will announce his decision, and then the Senate must approve Powell in office. If approved (which is likely), the new head of the Fed will take office early next year, when Yellen's term will expire.
The appointment of Powell is a widely-expected decision, so the market also left this fact without any reaction. Nevertheless, during his speech on the choice of candidate Trump is likely to touch upon the topic of monetary policy in the context of the planned tax reform. This speech (which will be held today during the American session) may affect the dynamics of trading of the EURUSD pair, especially after an extended period of trading flat.
Returning focus to yesterday's meeting of the Fed, it is worth noting that it was clearly "passing" without Yellen's press conference and without the updated economic quarterly forecasts. In the accompanying statement, the regulator again expressed its dismay regarding the low inflation, which remains below the target two-percent level. On the other hand, the Fed noted an improvement in the labor market, an increase in economic activity, and an increase in investment. In other words, the current situation makes it possible to speak about a smooth increase in the rate, although inflation remains the "weakest link".
This can not be said about the American labor market. The latest report from the agency ADP says that the official data (which will be published on Friday) will be above the projected values. According to ADP analysts, the increase in jobs in October was 235, 000 (although the forecast was much more modest - a gain of 202, 000). It is worth noting that analysts expect nonfarm payrolls gains, that will be published on Friday, to come in at 310, 000. On the other hand, such anomalous dynamics are a consequence of the powerful hurricanes that swept through the United States.
In September, the real picture of the US labor market was distorted (the number of employees was reduced by 33, 000), and now the situation can also be displayed not objectively (only with a "skew" in the direction of an increase in employment). Here it is necessary to take into account the specifics of the statistical estimate of those who have been dismissed and who are employed in the context of natural disasters. Thus, the abnormally high figures tomorrow will hardly shock the markets.
It is much more important to pay attention to another indicator, namely, the growth of the average hourly wage in the United States. This indicator is a precursor of inflationary trends, so tomorrow will play a key role. In September, it showed a good result (+ 0.5%), but October figures, according to experts, will be somewhat more modest, +0.2. For bulls of the EURUSD pair is important that the indicator remained above the zero level, otherwise the dollar will be under certain pressure.
In general, the euro-dollar pair will be affected by the US currency, because the euro does not have its own leverage to determine the dynamics. At the beginning of this week, a block of key European macroeconomic statistics came out, but the published figures could not help the euro. And this despite the fact that the unemployment rate fell to a record 8.9%, and the GDP index exceeded forecasts (0.6% q/q, 2.5% y/y). Ignoring this positive data, traders focused on the consumer price index, which after a two-month stagnation at 1.5% was down 0.1%. The market recalled the recent words of Mario Draghi, who threatened to prolong the program QE, if inflation does not reach its target level. And although it is still too early to talk about such conclusions (the stimulating program will be in effect until September 2018), traders closely follow inflation trends. Slowdown is a very alarming signal for the market, although, in my opinion, rising oil will correct this situation in the coming months.
From a technical point of view, the euro-dollar pair continues to show a flat trend, in a downward price channel, between the middle and lower lines of the Bollinger Bands indicator on the daily chart. The support level is the price of 1.1585 (the bottom line of this indicator). In the short term, this price range can be used to open short positions. To reverse the situation, the pair's bulls need to gain a foothold above the 1.1750 mark - in this case, the price will overcome the middle Bollinger Bands line, and the indicator Ichimoku Kinko Hyo will form the signal "Golden Cross", which warns about a trend change. In this case, the pair can reach the level of 1.1880 - this is the upper limit of the Kumo cloud on D1, which coincides with the upper line of the Bollinger Bands indicator.
