Global macro overview for 04/12/2018

Jerome Powell did not comment on monetary policy, but he mentioned a strong economy. He assured us that the Federal Reserve mission is to support economics and strengthen the financial system. According to him, the Fed managed to achieve this goal.

The unemployment rate is the lowest in almost half a century. Apart from the labor market, the strength of the economy is also visible in other areas - higher wages, higher household assets and consumer confidence in supporting expenses. Importantly, wages should now increase even faster. Productivity has also increased, but it is not known if this is a constant trend.

The other FOMC representatives have recently underlined the transition to a stronger dependence of their decisions on data, which revived the debate about the scale of increases next year. Such a change in communication from the Fed was received as an invitation to contest the FOMC projection, assuming five more hikes in the cycle (taking into account the decided raising of rates in December). The change in the Fed's bias enforces a change in the market approach, which will not be ready to price further moves in advance, regardless of how many of them will ultimately be theirs.

Let's now take a look at the US Dollar Index technical picture at the H4 time frame. The market has failed to rally above the recent swing high at the level of 97.51, so the price has reversed towards the technical support at the level of 96.63 - 96.71 zone and is currently testing it. Any breakout below this zone will open the road towards the next support at the level of 96.40 and 96.32. Weak and negative momentum supports the short-term bearish outlook.

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