When September Comes:
Welcome to September FOMC week! Yes, it’s finally here. Recent market turmoil has meant that markets are now only pricing in a 28% chance that the Fed raises rates on Thursday, but are up at 59% for the Fed to move in December.
With Fed policymakers week after week talking up market turmoils on the Vantage FX blog and a slowdown in China as reasons for a wait and see approach come Thursday, markets have had plenty of reasons to push out their September bets.
USD longs have been cut heading into Thursday’s decision, with the trend change on USDX confirmed with no higher high. I am expecting price to come back down a little more and continue to flag into the decision before any further up leg.
It’s always worthwhile keeping a USDX chart handy when you’re trading the majors. You can Trade USDX with a Vantage FX account here.
In the shadow of FOMC week, we also have major central bank meetings in Japan and Switzerland. With no interest rate surprises expected from either the BoJ or SNB, all eyes stay fixed on the US, but for Asian traders, keeping an eye on Japan is definitely worthwhile.
Both economic growth and inflation continues to lag despite the BoJ’s 80 trillion Yen per year asset buying program. Something that is concerning to policymakers on the island who are also trying to be wary of any increases which could further weaken the JPY and heap more pressure on already high import prices.
In the midst of QE, USD/JPY has put in a massive bullish trend. As things have started to slow down, price has slowed down and a range has formed. With price smack bang in the middle of this range right now, the risk:reward on both sides isn’t great, but with QE increases in the near term looking unlikely, upside could be expected to continue to be capped into FOMC.
On the Calendar Monday:
CNY Industrial Production y/y (6.1% v 6.3% expected)
CNY Fixed Asset Investment ytd/y (10.9% v 11.2%)
Quiet one on the data front to start the week, but markets still have Chinese numbers from the weekend to digest.
Chart of the Day:
Head of Commodity research at Goldman Sachs Jeffrey Currie has had this to say about Oil in a research report this weekend:
“The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016.”
“The potential for oil prices to fall to such levels, which we estimate near $20/bbl, is becoming greater.”
Still capped by that descending trend line, if price can trade below the marked zone, then any retests could be a good opportunity to rejoin the bearish trend.
Do you see opportunity in trading oil?
Dane Williams – @VantageFX
Risk Disclosure: In addition to the website disclaimer below, the material on this page prepared by Vantage FX Pty Ltd, does not contain a record of our Forex trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. The research contained in this Australian Forex broker report should not be construed as a solicitation to trade. All opinions, news, research, analyses, prices or other information is provided as general market commentary and marketing communication – not as investment advice. Consequently any person acting on it does so entirely at their own risk. The experts writers express their personal opinions and will not assume any responsibility whatsoever for the actions of the reader. We always aim for maximum accuracy and timeliness and Vantage FX shall not be liable for any loss or damage, consequential or otherwise, which may arise from the use or reliance on the service and its content, inaccurate information or typos. No representation is being made that any results discussed within the report will be achieved, and past performance is not indicative of future performance.