Global macro overview for 28/01/2016:
The Fed kept the interest rates on hold yesterday, which was in line with expectations. Moreover, in its statement the Fed mentioned that the members were closely watching global economic and financial developments. An important line from the statement was the one regarding the 2% inflation target. The Fed officials acknowledged inflation was estimated to stay "low in the near term" due to continued drop in energy prices; at the same time, growth of the US economy slowed in the end of the last year. No hints were done regarding a possible pace of further rate hikes, but it was mentioned in the statement that the rate hikes would depend on "the economic outlook as informed by incoming data". The conclusions are rather simple to draw: the Fed still thinks the further rate hike is an ongoing, data dependent process which is now on hold due to the low inflation and falling energy prices.
Now let's take a look at what's changed on the US Dollar Index daily chart after the Fed event yesterday. It looks like the market wasn't strong enough to break above the resistance at 99.98 and now it is threatening to break out of the channel and continue lower towards the important support at 97.18. To confirm this scenario, the traders should wait for the daily candle to close on lows.
