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Will the hawkish message continue with today’s FOMC?

September 21, 2022
by Joseph Jeffriess, Market Analyst

Plenty of attention will be on today’s FOMC meeting. Traders are looking for a ¾ or point increase from the Fed today, taking rates to 3.25%. This is what the market expects: anything more and USD positive, anything less USD negative.

That’s a simple look. The projections and the statement will be the key parts traders will be looking at. We all saw the market’s reaction to last Tuesday’s CPI surprise, and it not only revived the USD but also nailed stock indexes, risk currencies and crypto.

Traders will be looking to see any inflation surprises in the projections, what the Fed thinks about the current position, and how far the rates cycle may need to go. If any of these remain on the hawkish side, we could see further gains from the USD and further losses on risk markets, including crypto. Fed funds futures terminal rate has also been raised to 4.5% by April, increasing from 4.0% before last Tuesday’s CPI report.

Looking at the USD index. If influences continue to support price we could see a new breakout above 110.30 resistance, continuing the current fast trend. The USD index has formed a new HL after the CPI spike got the current fast trend back on track. We want to see resistance beaten to confirm that the trend is truly underway, and a break of the September high would further that confirmation.

The Nasdaq has performed the worst out of the three main US indexes since the 16th of August. The NDX100 CFD index, which tracks the Nasdaq, dropped close to 15% since that high. Some short-term support is starting to set up on the NDX100, but if we see hawkish pressure resume, we would be looking for a move back to 11,450, an area that has shown demand back in July.

The FOMC projections, funds rate and statement will be released at 2:00 pm EST, with the Press conference to follow at 2:30 pm.
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