FOMC Minutes show Fed is serious about inflation
Recall that during the September 21st FOMC meeting, the Committee chose to hike the Fed Funds rate by 75bps for the third consecutive meeting to bring the key rate to 3%-3.25%. The Minutes from that meeting noted that the cost of doing too little outweighed the cost of doing too much. They also noted that the labor market would need to weaken to bring down high inflation. Several also said that after rates reach a sufficient level, they will need to hold this restrictive rate for “some time”. In addition, the Minutes went on to say that at some point it would be appropriate to slow the pace of rate increases while assessing the cumulative effects of policy adjustments. Some may be splitting hairs as to whether this last statement is a Fed Pivot, but it seems to just be members commenting on the path of rate hikes, rather than the pace of rate hikes.
Everything you need to know about the Federal Reserve
After the Minutes were released, the CME FedWatch Tool showed that markets were pricing in an 84% chance of a 75bps rate increase at the November 2nd meeting. However, this may change after the US CPI data is released tomorrow.
Source: CME
The US Dollar Index has been moving aggressively higher since the end of March as it became apparent that the Fed would be hiking rates at a faster pace than initially thought. The DXY traded in an orderly channel from 97.69 on March 31st to 114.79 on September 28th. It then pulled back to horizontal support just above the bottom trendline of the channel, near 110.05, and has been moving higher since. On Monday the DXY reached the 61.8% Fibonacci retracement from the highs of September 28th to the lows of October 4th near 112.97 and has been oscillating around that level.
Source: Tradingview, Stone X
Trade the DXY now: Login or Open a new account!
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
On a 240-minute timeframe, the DXY is nearing the apex of a symmetrical triangle. If the US Dollar Index breaks higher, the first resistance is at the September 28th highs of 114.79. Above there, price can move to the 161.8% Fibonacci extension from the highs of September 28th to the lows of October 4th near 116.04 and then horizontal resistance from March 2002 at 116.76. However, if the DXY breaks lower out of the triangle, first support is at the lows of October 11th at 112.41, then the lows of October 4th at 110.06. Below there, strong horizontal support dating to July 14th crosses at 109.29.
Source: Tradingview, Stone X
With the Fed raising 75bps at its September meeting, the FOMC Minutes noted that the risks of doing too little outweighed the risk of doing too much. Despite what some may see as a potential Fed Pivot moment, the CME Fedwatch Tool showed that there was an 84% chance of a 75bps rate hike on November 2nd. What will markets think after tomorrows CPI data? Watch the DXY to find clues as to what the Fed may do next!
Learn more about forex trading opportunities.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.
ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.
City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.
The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.
The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.
The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
© City Index 2024