Daily Market Insights



Fed's Williams looks to strengthen the monetary policy

San Francisco's Federal Reserve Bank President John Williams stated that the Fed will begin to reduce the $4.5 trillion balance sheet and strengthen the monetary policy later this year. Williams said that "The US economy is about as close to the Fed's dual mandate goals on maximum employment and price stability."

Based on the FOMC minutes, we expect the Fed Reserve officials to release a plan on shrinking the balance sheet later this year. The U.S. economy seems to have fully recovered from the global financial crisis and the ensuing recession.

Williams mentioned that he is expecting three-four rate hikes this year, including the rate hike in March. Most of the investors and traders see an 80% chance of a rate hike in the Fed’s tentative June 13-14th meeting. However, the inflation did not reach the 2% inflation target and Williams said that "With the economy doing well and some of the factors that have held inflation down waning, I expect we’ll reach that goal by next year."

Intraday bias in USD/CHF remains bullish for the moment with support and price action holding support levels at 0.9720. The near term outlook stays bullish and further rise is expected from current levels with price action indicating a consolidation pattern and an upward bias.

An upside breakout through 0.9760 is expected later with a bullish momentum and pair trading above the 50EMA and 100SMA. Pair trading on rebound shows signs of medium term bullish movement to upward bias and targets projection of 0.9853 levels.

Hence, we’d expect resumption of a larger trend from current resistance turned support levels. With the pair holding the area from the downtrend, it has been unable to break below the levels and this suggests that the pair is looking for a change in trend.

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