Global macro overview for 06/07/2017

Global macro overview for 06/07/2017:

The FOMC Meeting Minutes delivered some interesting information regarding further monetary policy. The careful analysis of the minutes revealed that FOMC members continue to support rate hikes, but are split when it comes to deciding when they should start reducing the balance sheet. For some of the policymakers the best time would be "next few months" and for others "later term this year". Moreover, FED members noted that financial conditions were loosening despite the interest rate rises and the recent inflation rates are lower than expected. Nevertheless, several members have noted an increase in import prices, which is in line with the inflationary trend in the medium term. FED policymakers maintain a positive language when describing inflation, and the last weakness they throw at the one-off factor. And the last, but not least: most FOMC members supported a rate hike in June as well as another rate hike this year.

Generally it can be said that the minutes are slightly pro-dollar, but of course, there is a lack of consensus among the members regarding the balance sheet reduction process. Certainly, market participants need to look for better data from the US that could build such consensus. The first chance will be the Non-Farm Payrolls data this Friday and any figure better than expected will be another important argument for FED policymakers to justify the interest rate hike.

Let's now take a look at the USD/JPY technical picture on the H4 time frame. The market is trading near the swing high in overbought conditions. There is a visible bearish divergence between the price and the momentum oscillator, so the corrective cycle towards the technical support at the level of 112.92 can start any time now. Nevertheless, the better than expected data from ADP and NFP might move the pair even above the level of 114.34.

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