June FED Rate Hike – Fundamental vs Technical Analysis

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The Federal Reserve is widely expected to raise the Federal Funds Rate today, from 1.75% towards 2.00% benchmark points.

Exactly at 18:00 GMT the FED will issue a statement, which will contain the interest rate outlook, along with its latest economic forecasts.

At this stage, the Market already priced in the June Fed rate hike, therefore, the USD could be awaiting other factors before it would decide on a trend.

One of the things which could inject volatility and cause sudden moves on the charts could be the dot plot chart. The dot plot is a chart where anonymous FED officials’ forecast on interest rates expectations, and it currently shows a total of three rate hikes for 2018.

With a rate hike taking place on the 21st of March 2018 and with another hike almost guaranteed to take place today (13th of June), this would leave the FED with only one more rate hike left for the rest of the year.

In simple terms, one of the main fundamental triggers for this event would be an increase of the dot plot, from three hikes towards four hikes, adding one more hike for December 2018. Should this be the case, then the USD bulls could get a boost of confidence.

Statistically, market participants see a 38% chance of a 4th rate hike this year.

Are you expecting a June Fed Rate Hike? Open your account a trade it!

Another factor would be the actual FOMC Press Conference which will take place at 18:30 GMT. During this event, FED Chair Jerome Powell will be elaborating on the FED’s economic projections and decisions but will also answer important questions.

From a Fundamental perspective, Chair Jerome Powell has reasons to deliver a hawkish speech, as the FED is hovering around their 2% inflation targets. With a stable GDP growth, with jobs sectors showing increases in payrolls, higher hourly earnings and a somewhat stable unemployment rate, the FOMC could be hawkish today and deliver confident answers.

The US economy seems to be doing well so far, and a June FED rate hike is sustained with the economic indicators and figures.

However, during the press conference FED Chair Jerome Powell would be asked delicate questions.

One of the concerns could be the case in which he will be asked how the current Trade War possible situation and tariffs changes would affect the US economy.

Another bearish factor could reflect an unsatisfying view on the current political turmoil in Italy, and how the bond market sell-off could affect the global economy if the situation escalates.

The last but not least of the main topics would be the 10-year Treasury Yield and the FED’s view on the 3% topping in May.

Technical Analysis – Elliott Wave

The charts are painting a different picture than the fundamental or speculative side.

The current Wave Count explained and shared below is pointing towards more possible weakness in the USD. Should this be correct, then the main trends could begin unfolding some of the most anticipated Impulses for the month of June.

EUR/USD could start a bullish impulsive wave towards 1.2150 levels and XAU/USD could finally bounce off the 1295.00 / 1285.00 significant supports, possibly aspiring for the 1360.00 levels.

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Technical Analysis Recap:

Going back and looking at the previously posted views, one could establish that the Market could be positioned once more for another trigger, and a possible continuation of the recently emerged trends.

On May 17th the main view and the Reversals technical triggers were posted with the “USD Bulls Vs Bullfighters – Patterns At Decisive Levels” article.

Since then, the previous trends reversed indeed, and while those swings were happening, the analysis was updated with the 21st of May “Market Juncture – Crucial USD Decision” and the 29th of May “EUR & XAU Bulls Awaiting Their Turn” videos.

After that, the “Preparing For The Non-Farm Payrolls, The Elliott Way” article was posted on the 30th of May, highlighting some important technical patterns. Of course, all this was followed up, updated, and continued live during the 1st of June “NFP Is Coming!” Webinar.

Forex

Dollar Index (DXY) – 2H Chart

Dollar Index DYX June FED Rate Hike

The Dollar Index (DXY) reversed on the down-side from the previously projected 94.90 levels. The 1st leg on the downside has been labeled as the Minuette (a) (orange) because it is showing a 3 swings sequence, thus determining the overall pattern, which appears to unfold as a Flat Structure.

Minuette (b) (orange) corrective structure has been labeled as a Running Flat, with a complex combination within its wxy (pink) sub-waves.

Minuette (c) (orange) is typically showing the 5 waves sequence within it, hence the reason why at the end of it, Minute a (blue) has been placed.

Moving closer towards the United States CPI data and the FOMC Rate Statement, DXY seems to be trading within a sideways corrective structure, unfolding within a Rising Channel.

Minute b (blue) is approaching the 50-61.8% Fibonacci Retracements of Minute a (blue), but also the 100% Fibonacci Extensions of Minuettes (a) & (b) (orange).

If the Fibonacci levels would hold and pose as the Resistance, then DXY could start unfolding an aggressive Impulsive wave, labeled as Minute c (blue).

 

EURUSD – 2H Chart

EURUSD June FED Rate Hike

EUR/USD reversed on the up-side from the 1.1520 levels, with Minute a (blue) showing a 3 swings sequence in Minuette (a) (orange), a Running Flat structure in Minuette (b) (orange), and an Ending Diagonal in Minuette (c) (orange).

Minute b (blue) appears to be unfolding as a Contracting Triangle structure, labeled as (a)(b)(c)(d)(e) (purple).

Should the 1.1750 levels hold as a Support, then EUR/USD could be send towards a bullish journey, aspiring for 1.2150 levels and possibly enjoying an Impulsive Bullish wave.

 

GBPUSD – 2H Chart

GBPUSD June FED Rate Hike

GBP/USD reacted towards the up-side from the crucial 1.3300 Levels, showing a Leading Diagonal in Minuette (a) (orange).

The retracement wave Minuette (b) (orange) appears to be taking a Descending Channel form, unfolding as a complex wxy (pink) structure in its sub-waves.

The current correction is sitting at the 61.8% Fibonacci Retracements of Minuette (a) (orange) and if a Support would occur, then GBP/USD could commence an Impulsive Bullish wave.

If Minuette (c) (orange) would start, then GBP/USD could get a sling-shot effect towards the 1.3750 Levels as the next Resistance.

 

USDJPY – 2H Chart

USDJPY June FED Rate Hike

USD/JPY topped out around the 111.00 levels, as mentioned in the previously posted articles.

The first leg on the down-side in Minute a (red) unfolded with a 5 swings sequence, which could indicate a Zig-Zag structure in Minor B (blue) corrective pattern.

Following the sharp drop, USD/JPY retraced on the up-side within Minute b (red), showing a Leading Diagonal in Minuette (a) (orange) and an Ending Diagonal in Minuette (c) (orange).

Minute b (red) seems to be completing at the 78.6% Fibonacci Retracements of Minute a (red) and if a Bearish Impulsive sequence would begin, then USD/JPY could be dropping once more in a selling spree towards the 107.00 levels.

 

AUDUSD – 2H Chart

AUDUSD June FED Rate Hike

AUD/USD gained support as well on the 0.7450 levels, showing the first Impulse in Minute (I) (blue) and a complex corrective structure in Minute (II) (blue). The (w)(x)(y) combination in Minute (II) (blue) has been labeled as a Running Flat.

After Minute (II) (blue) finalized, AUD/USD rose again with another 5 swings sequence in Minuette (i) (black) and this could indicate a Bullish Extension or a Rally.

Minuette (ii) (black) retraced 61.8% of Minuette (i) (black), honoring the Golden Ratio and the Fibonacci scale, resting and awaiting a decision at the 0.7560 levels.

Should Minuette (iii) (black) begin, then this could turn out to be the Extension within a larger degree Bullish Impulse, and AUD/USD could rally towards the 0.7850 levels.

 

NZDUSD – 2H Chart

NZDUSD June FED Rate Hike

NZD/USD benefited as well from the USD’s weakness and bounced off the 0.6860 levels, showing a Leading Diagonal in Minute (I) (green) and a Regular Flat in Minute (II) (green).

This currency pair is also showing signs of a possible Bullish Extension or a Rally.

Minuette (i) (black) unfolded as a Leading Diagonal and Minuette (ii) (black) appears to have completed the correction, showing a wxy (pink) complex structure and unfolding within a Descending Channel.

The Descending Channel shows the possibility of a Bullish Breach occurring, which could be decisive and could catapult NZD/USD towards the 0.7250 levels as the significant Resistance.

Metals

Gold (XAUUSD) – 2H Chart

XAUUSD June FED Rate Hike

Gold (XAU/USD) has shown an instant bullish reaction on the previously mentioned 1285.00 levels.

The overall structures are pointing towards the fact that XAU/USD seems to be having difficulties in commencing a Bullish Rally, but with signs pointing towards that possibility.

After it rose with a Leading Diagonal in Minute (I) (blue) and the next Bullish Impulse in Minuette (i) (black), XAU/USD started developing complex structures. Minuette (ii) (black) unfolded as a combination within its wxy (purple) sub-waves.

Minuette (iii) (black) seems to be waiting for a favorable event, showing a Leading Diagonal in Sub-Minuette I (light blue) and a Flat Correction in Sub-Minuette ii (light blue).

If a Bullish Rally would start, then XAU/USD could rise as high as 1360.00 levels.

 

Silver (XAGUSD) – 2H Chart

XAUUSD June FED Rate Hike

Silver (XAG/USD) seems to have completed a very complex bearish structure of a larger degree and now showing bullish features.

The recent rise shows a 5 swings sequence in Minuette (i) (black) and a sharp correction in Minuette (ii) (black), which could be a sign that XAG/USD could have already started the Bullish Extension.

Should the Fundamentals support Silver with its bullish aspirations, then this metal could reach as high as 17.80 levels.

Energy

Crude Oil (WTI) – 4H Chart

Crude Oil June FED Rate Hike WTI

Crude Oil (WTI) rapidly reversed after it topped at the 72.25 levels, as per the previously posted views.

The first leg on the down-side has been labeled as Minute a (red). It was then followed by a short-lived correction in Minute b (red).

WTI seems to have entered bearish territory, as Minuette (i) (black) broke through the lower trend-line of the Ascending Channel.

Minuette (ii) (black) is also showing a potential continuation pattern towards the down-side, unfolding its correction within a Rising Channel and dangerously retesting the former breach.

If WTI would be destined to head lower, then it could fall hard towards 60.50 or even 54.50 levels.

US Indices

Dow Jones (US30) – 4H Chart

Dow Jones June FED Rate Hike

Dow Jones (US30) has been trading mostly in a range, correcting on the upside after the big hit taken in early February of 2018.

The Correction in Intermediate (B) (red) seems to be approaching its completion soon, with the 25850.00 and 26050.00 levels remaining in focus, as they are located as decisive Fibonacci lines, such as the 100% Fibonacci Extensions of Minors W & X (purple).

The recent up-trend in Dow Jones would still leave room for more up-side after a retracement.

 

S&P500 – 4H Chart

SNP500 June FED Rate Hike

S&P500 is also trading within a complex corrective structure in Intermediate (B) (red), following the 350 points historical drop which painted a red picture back in early February 2018.

The 2825.00 levels could be reflecting a significant resistance, as it seems as if the Fibonacci lines are lined-up.

The Ascending Channel in which Minor Y (purple) is unfolding also seems to be synchronizing with those levels.

Should the SNP500 get hit once more and the 2825.00 posing as a decisive Resistance, then Intermediate (C) (red) could reach as low as 2475.00 levels, to finalize the current Primary Degree 4 (blue) corrective pattern.

Many pips ahead!

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Richard is passionate about technical analysis with years of charting experience under his belt. When it comes to his insights and how he analyses the markets, he uses leading analysis tools. In particular, Elliott Wave Analysis is his forte, and he dedicates the majority of his time using this analytical method. Richard uses Elliott Waves in combination with Structures, Patterns, Divergences, and then spices things up with Vibration Levels, Fibonacci measurements, Channeling, Break-outs or Flag formations.