Dollar bulls were back in the saddle again on the first full trading day of this holiday shortened week as speeches from important Federal Reserve members has sparked a bit of USD love. Harkening back to late last week, Fed Chairwoman Janet Yellen didn’t mince any words in suggesting that rates will most likely be hiked this year, and Vice Chairman Stanley Fischer echoed that same sentiment shortly before lunchtime here in the US today. The confidence in which the two highest ranking members on the Fed’s voting board voiced their intentions has struck a chord with investors and the old saying about “Don’t Fight the Fed” is being respected. Potentially adding to the rate hike fever is the Richmond Fed’s Jeffrey Lacker, a noted hawk, who will be speaking to the LSU Graduate School later this evening.
With the Fed speaking in hawkish tones while US data hasn’t been too encouraging shouldn’t be too much of a surprise to many. They have been speaking in this manner since Yellen’s press conference to announce the end of Quantitative Easing back in October 2014; indicating that they would move forward with rate hikes, but after a considerable time. We must remember that the Fed is a very slow moving vessel, and it doesn’t usually change its mind on the back of a slow month, or even a slow quarter for that matter. They have been relatively unchanged in their planned actions for about the last year.
Considering the Fed is simply telling us what they’ve already told us before, the USD love affair might not have the brevity and scope it had in the previous 8 or 9 months. Back when we were just realizing the Fed was REALLY going to be raising rates for the first time in eons while most of the other central banks of the world were battening down the hatches, the USD went on a tear. However, we are now familiar with the path the Fed has laid out, and USD strength may get a little choppy from here; some days it will be great, other days, not so much. Overall though, the USD could continue to be the overall benefactor of the Fed’s plan.
On the technical front, the bounciness of the USD may start to play out in the GBP/USD very soon. After losing some ground on the talk of a leaked secret Bank of England document dubbed “Project Bookend” that detailed the bank’s plans in case of a Brexit, the GBP/USD may have found some support. There is a Fibonacci based Bullish Gartley Pattern that recently completed near 1.5350 that also correlates to previously established support that could help this pair climb back above 1.54. In addition, there is very little on the economic release front in either the UK or the US that could derail this technical pattern until Thursday. If Lacker continues to tow the same line this evening, profit taking could be the main story on the USD as we head in to the Asian trading session.