Technical Analysis

Fed to hike 25bps; the bar is high to flip the status quo for USD – TD

TD Research discusses its expectations for next week’s FOMC policy meeting.

We expect a 25bp rate hike at next week’s FOMC meeting
taking the Fed funds target range to 4.50%-4.75%, and raising the IOER
and RRP rates to 4.65% and 4.55%, respectively. The move would be the
second consecutive downshift in hiking pace by the Fed. Despite this, we
expect that post-meeting communication to emphasize that the Fed is not
done yet in terms of further tightening of its policy stance, and
signal that more rate hikes are still in the pipeline,” TD notes.

“FX: Barring a 50bp hike or a conditional commitment to stop
tightening, the bar is high to flip the switch on the status quo. USD is
stretched and oversold, but the catalyst for a reversal is absent
This Fed meeting will not be that catalyst as FX markets are not as
sensitive to central bank repricing as they used to be a few weeks
back,” TD adds.

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