EUR/USD and GBP/USD unchanged on the day
The hype for Powell’s speech was huge. He mostly delivered too; the shift to average inflation targeting will have major implications if inflation ever gets back above 2%.
At the same time, the short-term implications are small and even smaller if you believe inflation will stay low. What we’ve seen is the market try all kinds of different ideas on today. We’ve seen quick rallies and selloffs in just about everything. Where has it left us? There’s a bit of AUD/JPY strength and USD/CAD might be breaking down but the overall story is indecision.
A look at EUR/USD and GBP/USD (among others) shows a big doji candle right in the middle of the range.
I tend to see this as the continued formation of a head-and-shoulders top but there’s nothing resembling confirmation.
What makes me believe that a big move is setting up is the narrative uncertainty today. There isn’t much conviction in what’s happening on the ground or even in the paradigm around FX trading. That’s going to lead to traders fading any larger moves, before ultimately capitulating.