Fed minutes. What will the dollar look like in the coming days?

Yesterday we witnessed a publication Minutes by FED. At the meeting, the most recent interest rate cut and its projection on the further business cycle were assessed. The meeting itself can be assessed positively in terms of the impact on the dollar. We should observe slight strengthening in the next days. Among analysts, we can hear negative ratings related to the further course, mainly steam EUR / USDwho are looking for appreciation of the euro area currency. On the other hand, the market has been living for a long time on the strength of a strong and constantly strengthening dollar.

Mid-cycle adjustment

Most FED members have rated 25 points, the July interest rate cut. She was considered to be "Mid-cycle adjustment" . The main reason for this decision, the Federal Reserve explains, was to make the economy more flexible looking at it through the prism of recent economic turmoil. The escalation of the trade conflict on the China-US line has led to a kind of economic stagnation, and the specter of difficult (read more expensive) trade has brought skeptical sentiment in the US economy. The Fed wanted to some extent by cutting rates to recalibrate current monetary policy.

An embarrassing strong dollar?

Let us not forget, in the light of recent events, of President Trump's allegations against China of the alleged, deliberate weakening of the yuan. In his opinion, the policy of the Chinese government is to lead to a greater depreciation of the native currency, which is a response to the duties imposed by the US. It is not new to realize that strengthening the native currency is not beneficial for exporters. In this regard, bankers began to strongly point the risk of imposing duties on Chinese goods. Several of them suggested that this risk weighs heavily on the US economy, and the lack of prospects for its impact and possible reduction of its impact on trade contributes to the need to change monetary policy approaches. Its modification and flexibility and adaptation to the economy is to consist of more efficient operations on the interest rate.

Are we going to see further reductions?

The head of the Fed has been skeptical for many months about his interest rate cut. After the last change of mind, he added that they do not mean the beginning of the reduction cycle. However, among the Federal Reserve, the voices of several bankers woke up, who unanimously believe that 25 points are definitely not enough. A slowdown in the global economy and an increase in commercial risk in the US economy would define the need to lower interest rates at 50 points. They base their opinion on the yield curve of US ten- and three-year government bonds.

Declines on EUR / USD?

The strong dollar undoubtedly made itself felt. Analyzing recent moves on Edek, after the findings of Minutes, the market calmly accepted new information. In principle, they can be safely assessed as beneficial for further strengthening of the US currency, on the other hand, signals from the Fed (mainly those concerning forward guidance and asset purchase program) may negatively affect USD. For now, these topics are quite distant, however, the Federal Reserve is increasingly taking these solutions into account.

Chart EUR / USD, D1 interval. Source: xNUMX XTB xStation

Above we have the euro versus the dollar chart practically since January. Not so long ago it was possible to break the minima from April and May. You can see with the naked eye that in the alleged consolidation movement, the course is still heading south. Looking long-term, it's hard to see a sudden change in trend. FED and Trump successfully maintain a strong dollar.

Chart EUR / USD, H1 interval. Source: xNUMX XTB xStation

Short-term speculations on EUR / USD may bring a slight rebound. Currently on H1 you can clearly see the formation of the double bottom, with the proviso that the course is not too hard to break the local resistance (blue line). Looking technically at the H1 interval, there is a chance for a slight rebound. Most oscillators are neutral / slightly sales oriented.