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The Euro holds in red on Thursday and dips to one-week low at 1.1690, as hawkish Fed boosted the greenback.

As expected, the Fed raised interest rates by 0.25% but also removed the word accommodative from its policy statement, signaling that the central bank is on the way for further rate hikes.

American economy is strong, with inflation holding near 2% projection, labor sector showing a number employed people rising steadily and wages are also climbing, which creates an environment for Fed to continue tightening.

The EURUSD pulls back after five consecutive failures to clearly break above Fibo barrier at 1.1780 (61.8% of 1.2555/1.1300), which generated initial negative signal.

Today’s extension below former congestion low (1.1724) and Fibo 38.2% of 1.1526/1.1815 upleg (1.1704) was additional bearish signal.

Close below the latter is needed to confirm scenario and open supports at 1.1662/52 (converged sideways-moving 20/100SMA’s), with extension towards next strong supports at 1.1641/36 (rising 30SMA / Fibo 61.8% of 1.1526/1.1815).

Despite significantly weaker structure on lower timeframes, momentum on daily chart remains firm and still holding above its 7-d SMA, which could affect fresh bears.

Overall bullish picture sees dip-buying favored while 30SMA holds dips.

Res: 1.1711, 1.1738, 1.1757, 1.1780
Sup: 1.1670, 1.1652, 1.1641, 1.1617

Despite U.S. President Donald Trump's dissatisfaction with the Fed's monetary policy tightening measures, the Fed as expected raised interest rates by 25 basis points to a range of 2-2.25% on Wednesday. According to the dot plot, there will be one more rate hike in 2018, followed by three in 2019 and a final one in 2020, which is in line with June's expectations.

The economic forecast indicates that everything seems to be fine. The U.S. economy's expected growth was revised higher this year to 3.1% from 2.8%, thanks to tax cuts, higher oil prices, and capital expenditures. Employment is to remain at historic lows of 3.7%, and inflation will remain steady at 22.1% over the next three years. In my opinion, these projections reflect that we're living in a perfect world.

Fed Chair Powell doesn't yet feel threatened by the effects of the trade war, although he will continue to monitor its developments very carefully.

Interestingly, U.S. equity markets were pulled lower during Powell's press conference as Treasury yields tumbled across the curve dragging financial stocks with them.

In theory, low inflation expectations may continue to support non-financial stocks given that it's a key component of the required return on equity. However, my concern is that falling GDP growth rate will translate into lower profitability and corporate earnings growth. Given that valuations remain historically high, and interest rates on the rise, the threat to the equity bull market will likely increase over the next several months.

The Dollar was only slightly firmer against its major counterparts. The Dollar index traded 0.3% higher at the time of writing at 94.50, which is still well below August highs of 96.98. This suggests that yesterday's Fed decision was well priced in the market, and focus should now return to macro fundamentals for new guidance.

Several sets of U.S. economic data are due to be released today including the final reading of Q2 GDP, durable goods, trade balance and personal consumption expenditures prices. While Q2 growth is likely to be confirmed at 4.2%, durable goods for August is expected to rise 2% after a 1.7% decline in June. Given that durable products often involve capital investments, a rise in this figure may indicate that businesses are still not very concerned about any ensuing trade wars. It will also be interesting to see how trade tariffs are impacting the U.S. trade balance. In July the U.S. deficit with China hit record levels, so a continuation of this trend would raise the prospects of further tariffs on the remaining Chinese goods imported to the U.S.

General Trend:

• Asian equity markets trade mixed post Fed
• Reserve Bank of New Zealand reiterates the direction of next rate move could be up or down
• FTSE Russell to add China A-shares to its indexes from June 2019
• HSBC HK raises prime rate for the first time in 12 years, tracks rate hikes by HKMA and US Fed
• Bank of Japan (BoJ) Gov Kuroda expected to speak later today
• Indonesia, Taiwan and the Philippines expected to hold rate decisions today

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.2%
• (AU) Australia Bureau of Meteorology (BOM): Eastern and Southern Australia likely drier than avg for Oct-Dec
• (AU) Australia Aug Job Vacancies: 0.6% v 5.7% prior
• (NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE (OCR) UNCHANGED AT 1.75%, AS EXPECTED
• (NZ) New Zealand: To offer NZ$1.9B in government bonds in Q4
• (NZ) New Zealand to offer NZ$150M in April 2025 bonds on Sept 28th
• (NZ) New Zealand Farmer Confidence moves into negative territory - Rabobank Survey

China/Hong Kong

• Shanghai Composite opened flat, Hang Seng +0.3%
• (CN) FTSE Russell said to assign secondary emerging market status to China A-shares as of June 2019; A-shares to be added to indexes from June 2019 - US financial press
• (CN) China said to issue guidelines aimed at curbing pollution in certain areas, plans to curb steel and coking output during the heating season - US financial press
• (CN) CHINA AUG INDUSTRIAL PROFITS Y/Y: 9.2% V 16.2% PRIOR (slowest rise since March)
• (CN) Trump accuses China of placing 'propaganda ads' in US newspapers
• (CN) US President Trump said to suggest he is going to call China President Xi tomorrow (Thursday) - US financial press
• (US) Pres Trump: China tariffs have had no impact on the US economy - press conf from NY
• (CN) China to cut import tariffs for some goods from Nov 1st (in-line with earlier comments) – press
• (CN) London-Shanghai Connect may begin as early as Dec 2018 - Chinese Press
• (CN) China PBoC set yuan reference rate:6.8642 v 6.8571 prior
• (CN) China PBoC Open Market Operation (OMO): Skips OMO v skipped prior; Net: CNY60B drain v CNY40B drain prior
• (CN) PBOC advisor expects no large yuan pressure from Fed hike - press
• (HK) Hong Kong Monetary Authority (HKMA) raises Base Rate by 25bps to 2.50%, tracking US Fed; Reiterates domestic banks are expected to soon raise prime rates
• HSBC: Raises Hong Kong prime rate by 12.5bps to 5.125% (first increase in 12 years), follows HKMA and Fed rate hikes; effective from Sept 28th

Japan

• Nikkei 225 opened -0.4%
• (US) Trade Rep Lighthizer: confirms opening negotiations on bilateral US-Japan trade deal
• (JP) Japan PM Abe: Confirms agreed with the US to start bilateral trade talks; US agreed not to impose further auto tariffs while trade talks continue
• (JP) BoJ announcement related to daily bond buying operation: unchanged

Korea

• Kospi opened -0.3%
• (KR) Bank of Korea (BoK) Chief Lee: Need to adjust extent of accommodative policy considering economic situation, monetary easing needs to be reduced; inflation and job situation not appropriate to raise interest rates
• (KR) South Korea Vice Finance Min Ko: Sees limited impact on Korea from US rate hike as decision was widely expected; risk of major foreign capital outflow not big
• (KR) China said to consider sending a top official to North Korea in Oct - South Korean press
• (JP) The Foreign Ministers of Japan and North Korea said to have held talks - Japanese Press

North America

• US equity markets ended mostly higher: Dow +0.2%, S&P500 +0.2%, Nasdaq +0.3%, Russell 2000 -0.3%
• (US) FOMC RAISES TARGET RATE RANGE 25BPS TO 2.00-2.25% (AS EXPECTED); FED STATEMENT REMOVES DESCRIPTION OF ACCOMMODATIVE
• (US) Fed Chair Powell: our economy is strong, inflation is stable - FOMC press conf
• (CA) Pres Trump: I rejected one-on-one meeting with Canada PM Trudeau; doesn't like their trade policy or negotiating style; we're not getting along with Canada's negotiators
• (US) DOE CRUDE: +1.9M V -1.5ME
• (AR) Argentina Econ Min Dujovne: confirms Argentina and IMF have agreed to new $57B standby credit facility - comments with IMF's Lagarde

Europe

• (UK) Prime Min May spokesperson: PM May and Pres Trump agreed that Brexit provides wonderful opportunity for big and ambition UK-US free trade deal
• (IT) Italy Government may postpone meeting over 2019 budget plan - Italian press
• (IT) Italy Five-Star and League parties said to prefer 2019 deficit target at 2.4% of GDP, seeks agreement with League on this level – press
• (IT) Italy Dep PM DI Maio: Italy will soon approve citizens' income

Levels as of 01:30ET

• Nikkei 225, -0.7%, ASX 200 -0.1%, Hang Seng -0.5%; Shanghai Composite -0.5%; Kospi +0.4%
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.2%, Dax flat; FTSE100 +0.2%
• EUR 1.1758-1.1710 ; JPY 112.92-112.62 ; AUD 0.7270-0.7243 ;NZD 0.6682-0.6642
• Dec Gold +0.1% at $1,200/oz; Oct Crude Oil +1.2% at $72.44/brl; Dec Copper -0.2% at $2.812/lb

Pivot (invalidation): 1.1725

Our preference Long positions above 1.1725 with targets at 1.1775 & 1.1795 in extension.

Alternative scenario Below 1.1725 look for further downside with 1.1710 & 1.1690 as targets.

Comment The RSI is mixed with a bullish bias.

Pivot (invalidation): 1.3180

Our preference Short positions below 1.3180 with targets at 1.3125 & 1.3100 in extension.

Alternative scenario Above 1.3180 look for further upside with 1.3220 & 1.3255 as targets.

Comment The RSI is capped by a declining trend line.

Pivot (invalidation): 112.90

Our preference Short positions below 112.90 with targets at 112.60 & 112.45 in extension.

Alternative scenario Above 112.90 look for further upside with 113.05 & 113.15 as targets.

Comment The index currently faces a challenging resistance area at 112.90.

Pivot (invalidation): 0.7265

Our preference Short positions below 0.7265 with targets at 0.7245 & 0.7235 in extension.

Alternative scenario Above 0.7265 look for further upside with 0.7275 & 0.7290 as targets.

Comment As Long as 0.7265 is resistance, expect a return to 0.7245.

Pivot (invalidation): 1.3010

Our preference Long positions above 1.3010 with targets at 1.3050 & 1.3080 in extension.

Alternative scenario Below 1.3010 look for further downside with 1.2975 & 1.2940 as targets.

Comment The RSI advocates for further advance.

Pivot (invalidation): 0.9670

Our preference Short positions below 0.9670 with targets at 0.9635 & 0.9620 in extension.

Alternative scenario Above 0.9670 look for further upside with 0.9700 & 0.9720 as targets.

Comment As Long as the resistance at 0.9670 is not surpassed, the risk of the break below 0.9635 remains high.

Pivot (invalidation): 2912.25

Our preference Short positions below 2912.25 with targets at 2893.00 & 2886.00 in extension.

Alternative scenario Above 2912.25 look for further upside with 2927.00 & 2941.00 as targets.

Comment The RSI is bearish and calls for further downside.