Global macro overview for 05/07/2017

Global macro overview for 05/07/2017:

The most important fundamental event today is the FOMC Meeting Minutes release at 06:00 pm GMT. This should not be a breakthrough publication for the US Dollar, as the FED at its last meeting made clear its current rhetoric. The bank hiked interest rates and FED Chairperson Jannet Yellen at a subsequent press conference ensured markets that weaker data from the US economy was triggered by transitional factors and that the process of monetary policy normalization would be implemented in the form set up in December last year. There are various viewpoints, saying the FED should start to roll over the balance sheet before making another interest rate hike, but the actual form of normalizing the monetary policy by FED is up to the policymakers.

The FED has acquired $4.5 trillion worth of assets that the bank hoovered up following the Global Financial Crisis. It is widely known that FED has a plan how to sell off some of these assets, but it did not communicate when the program will start despite a few remarks in the statement like 'relatively soon'; which isn't the clearest of indications.

The USD looks deeply oversold, looking through the prism of the bond market, so it may be sensitive to strengthening in the event of hawkish remarks in minutes. Market participants know already, that FED is planning to hike at least two times this year and the next hike might even occur in September 2017 if the data-dependent FED will agree.

Let's take a look at the US Dollar Index technical picture on the H4 time frame. After making another lower low, the price is trying to bounce above the important technical resistance zone between the levels of 96.32 - 96.51. Nevertheless, the market conditions on this time frame are starting to look overbought, so only hawkish statements in the FOMC Meeting Minutes might help the bulls to push the prices higher before the pullback.

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