Slight dovish tilt in Fed minute, June rate hike odds intact, GBP/USD looks heavy

The Fed minutes revealed nearly all policymakers favour starting balance sheet shrinking in 2017. The markets are yet again taking this story lightly. The yields should trade higher than where they are…
I see few commentators saying the Fed is not sure about the June rate hike. This is because the minutes say the policymakers feel it is better to wait for more evidence of Q1 slowdown being transitory before moving rates higher.
The comment is indeed dovish, but the markets aren’t taking this seriously either. The CME FedWatch still puts the probability of a June rate hike at 78%. Ahead of the minutes release, the probability stood slightly above 80%. So not a significant change…

GBP/USD looks heavy
Daily chartGBPUSD D1 (05-25-2017 0015).png
A bearish RSI divergence means the rally from the March low of 1.2109 has found a temporary top above 1.3048. The multiple failures to hold above 1.30 seen in the last few days also indicate bullish exhaustion. The RSI has moved out of the rising trend line as well.
Despite this the bears haven’t really had a big day.
A small rising channel is still intact and is seen offering support around 1.2890-1.29 levels. A break lower in favour of a bigger rising trend line support of 1.2810-1.2820 could be seen.
The pair looks heavy in the short-term, but the mid-term outlook remains bullish as long as the rising trendline remains intact.


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