فاریکس تجزیہ اور جائزے: 21.09.2023 - The FOMC's dot-plot chart will...

21.09.2023 04:31 AM

The FOMC's dot-plot chart will help determine sentiment

The FOMC meeting concluded on Wednesday. There are no questions about the interest rate. The absolute majority of economists and analysts believe that the rate will remain at 5.5%, but it will increase at least once more by the end of the year. The FOMC will also present an economic overview and forecasts for the next two years, issue an accompanying statement, and then hold a press conference with Federal Reserve Chair Jerome Powell. As we can see, the interest rate decision appears to be the least interesting in the current circumstances. Economic forecasts and the accompanying statement are of interest, but the updated "dot-plot" chart and Powell's remarks will carry much greater significance.

What is the dot-plot chart? In simple terms, it is a forecast of the interest rate for the next few years from each member of the FOMC. There are 18 of them. The last forecast was made in June 2023, and at that time, the majority of policymakers stated that they expected the rate to not exceed 5.75% by the end of 2023. Only two expressed support for 6%, and one for 6.25%. In other words, the majority of Fed officials believe that the rate will increase one more time in 2023. This aligns with Powell's statements about tightening once every two meetings (pause in September, hike in November, pause in December) and market expectations.

As for the following year, the rate could drop to 4.5%, and in 2025, it could range from 3.0% to 3.5%. However, the forecasts for 2025 are quite uncertain, and there is no consensus. I don't see the point in looking that far ahead right now. The significance of the dot-plot chart lies elsewhere. If the updated forecasts indicate higher rates in 2023 and 2024, this could trigger increased demand for the US dollar. In other words, if policymakers themselves suggest that the Fed's rate could rise more than 25 basis points this year and drop less next year than expected in June, it would imply a stronger and more hawkish sentiment within the FOMC. This, in turn, could support demand for the US currency.

And, of course, the opposite as well. If interest rate forecasts are lowered, the dollar could start a downward movement, coinciding with the formation of corrective waves in both instruments.

Based on the conducted analysis, I came to the conclusion that the upward wave pattern is complete. I still believe that targets in the 1.0500-1.0600 range for the downtrend are quite feasible. Therefore, I will continue to sell the instrument. Failure to break the 1.0636 level suggests the possible end of the first wave, which took on quite an extended form. So far, the presumed wave 2 or b looks highly unconvincing but may continue to develop (if it is indeed this wave).

The wave pattern of the GBP/USD instrument suggests a decline within the downtrend. There is a risk of completing the current downward wave if it is a d wave, but in my opinion, we are currently observing the formation of the first wave of the downtrend. At most, the British pound can expect the formation of wave 2 or b in the near future. I still recommend staying in short positions with targets around 1.2311, which is equivalent to 61.8% according to Fibonacci.

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