EUR/USD Long - Profit Locked In At 1.1175

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Taken Positions

EUR/USD: long at 1.1145, target 1.1340, profit locked in at 1.1175, risk factor **

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EUR/USD: Hawkish Fed Suggests October Is Still In Play

(stay long for 1.1340)

• San Francisco Federal Reserve Bank President John Williams said that “a little bit” more economic data could convince him to support a rate hike at the U.S. central bank's next meeting, in October. Once the Fed begins raising rate, he said, investors will have a better idea of what data will drive further rate hike decisions. 

• New York Federal Reserve Bank President William Dudley said the Fed remains on track for a likely rate hike this year and could reach its inflation target next year, faster than many other policymakers anticipate. Dudley said the first hike could come as soon as October as policymakers take stock of an improving economy. Dudley said he now feels inflation could reach that target sometime next year, a year or more sooner than the median forecast by Fed policymakers earlier this month. 

• Charles Evans, the dovish head of the Chicago Federal Reserve, said the Fed should leave interest rates near zero longer than planned and take an “extra patient approach” to tightening policy due to the risk that inflation will not rebound as quickly as expected. He added he would be open to an initial interest rate hike this year if the US economy improves enough to warrant it and as long as a gradual tightening path followed. He said he favors waiting until 2016 for the initial rate hike from near zero. 

• Interest rates futures implied traders remained doubtful of a year-end rate increase, assigning a 14% chance of a move in October and 37% in December. In our opinion market expectations are too dovish. This week US non-farm payroll data may shift the expectations to an October hike. Our forecast of Friday’s data is above the market consensus and we will be looking to switch our EUR/USD position to short later this week.

• The EUR/USD broke above some important moving averages today, which are support levels now. Today’s Eurozone data were sound. The European Commission showed the overall economic sentiment rose to 105.6 this month from 104.1 in August, the highest reading since April 2011 when it was 106.1. 

• We have locked in our profit on the EUR/USD long at 1.1175 and target 1.1340.

Significant technical analysis' levels:

Resistance: 1.1296 (high Sep 24), 1.1324 (61.8% of 1.1460-1.1105), 1.1330 (high Sep 21)

Support: 1.1183 (200-dma), 1.1148 (100-dma), 1.1146 (low Sep 28)