Stanley Fischer and William Dudley both stressed the positive impact from the oil price drop in the mid-term. While everyone has been concerned about the impact of oil prices on inflation, they feel lower inflation from reduced oil prices is temporary. Additionally, Fischer said the Fed is closer to removing the considerable time reference from its language. While Fischer could not give a precise estimate on the first rate rise, he reinforced that it should be data dependant. Construction spending jumped 1.1% and came in well ahead of an estimate of 0.6%. Most analysts expect the considerable time reference to be dropped at the December meeting where the Fed will also give updated projections.
Greenback likely to extend gains
USD/JPY was the biggest beneficiary of the renewed strength in the greenback. The pair traded as high as ¥119.29, its highest since July 2007. USD/JPY has remained steady in Asian trade and continues to hover around those highs. There is no data out of Japan at all today but you can never rule out Japanese officials making some comments, particularly as we head towards elections. Perhaps the bigger reaction will come from the USD side of the equation where we have more fedspeak along with the ADP non-farm payrolls reading. From a price action perspective, the momentum is extremely bullish. For traders already long, there is no reason to exit. Trailing stops is the best option in this situation and letting the position run. Meanwhile, for traders looking for fresh longs, pullbacks into the uptrend which comes in around 117.20 could be a good opportunity to get set on longs.