Will the FOMC continue the US30s run higher?
Traders will be looking forward to today’s FOMC seeking future direction on rates as inflation starts to cool but remains relatively high. The new banking crisis has also significantly influenced the markets over the last several weeks.
Stocks have been one of the markets hardest hit by the uncertainty thrown up by the banking crisis. The US30, in particular, has been hard hit, and sellers cut just over 7% off the index in four weeks.
Looking at recent price action, we can see some buyer confidence returning after bailouts, and political action was taken to help stop the rout. The US30 held support and broke its tight range yesterday with a 0.98% rally.
Inflation and rates had been key influences before the banking issues arose. Today’s FOMC could play an important role in the short term. Rates are now basically priced in with a 25-point increase, and Fed trackers see a 15% chance of a hold at an 85% chance of a 25-point increase.
The statement for us is the important part unless we see a hold which would be unexpected and should give the US30 a boost through its trendline. If the Fed remains hawkish and discounts the banking issues, this could set off selling with worry over higher rates and possible inaction to support the sector. If the message is more to the dovish side, we will be looking for further upside from the new up leg, and hopefully, a break of the current trend could indicate that the correction could be starting to wain.
Minor resistance remains at 32,600, and support is seen at 31,850. Price continues to hold a series of LHs and LLs, but a new push higher could break that pattern.
The short term comes down to the fed message, which will be released at 05:00 am AEDT with the Federal funds rate. The press conference follows at 05:30 am.
US30 D1 Chart
* The information provided on this page are the opinions of the author and do not necessarily reflect the opinions of Eightcap and are not endorsed by Eightcap.
Any person acting on the information presented on this page does so entirely at their own risk. No representation or warranty is given as to the accuracy or completeness of this information. Any research provided does not have regard to any specific investment objectives, financial situation and needs of any specific person who may receive it.
Margin trading involves a high level of risk and may not be suitable for all investors. You should carefully consider your objectives, financial situation, needs and level of experience before entering into any margined transactions with Eightcap, and seek independent advice if necessary.