FOMC day [Video]
|US Dollar: Sept '21 USD is Up at 92.450.
Energies: Sept '21 Crude is Up at 72.53.
Financials: The Sept '21 30 Year bond is Down 17 ticks and trading at 164.15.
Indices: The Sept '21 S&P 500 emini ES contract is 28 ticks Higher and trading at 4401.50.
Gold: The Aug'21 Gold contract is trading Up at 1804.90. Gold is 9 ticks Higher than its close.
Initial conclusion
This is not a correlated market. The dollar is Up+ and Crude is Up+ which is not normal and the 30 year Bond is trading Lower. The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice-versa. The S&P is Higher and Crude is trading Higher which is not correlated. Gold is trading Higher which is not correlated with the US dollar trading Up. I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down. I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong. As traders, you need to be aware of this and proceed with your eyes wide open. Asia is trading mainly Lower with the exception of the Hang Seng and Singapore exchanges which are mainly Higher. At this time all of Europe is trading Higher.
Possible challenges to traders today
-
Goods Trade Balance is out at 8:30 AM EST. This is Major.
-
Prelim Wholesale Inventories m/m is out at 8:30 AM EST. This is Major.
-
Crude Oil Inventories is out at 10:30 AM EST, This is Major.
-
FOMC Statement is out at 2 PM EST. This is Major.
-
Federal Funds Rate is out at 2 PM EST. This is Major.
-
FOMC Press Conference starts at 2:30 PM EST. This is Major.
Bias
Yesterday we gave the markets a Downside bias as the USD, Crude, and the Bonds were all trading Higher and that is usually a recipe for a Downside day. The markets didn't disappoint as the Dow dropped 86 points and the other indices lost ground as well. Today is FOMC Day and as such our bias is Neutral.
Could this change? Of Course. Remember anything can happen in a volatile market.
Commentary
Yesterday we gave the markets a Downside bias as our rules of Market Correlation told us such. After 8:30 AM EST Durable Goods and Core Durable Goods were released and they did not meet expectations. Today is FOMC Day and therefore our bias is Neutral. Why? Because the markets have never shown any sense of normalcy on that day. Do we think the Federal Reserve will raise rates? No. The Fed knows the economy is still not out of the woods yet so we don't expect them to hike. Lastly, I don't if any of you saw the Capital Police testimony yesterday but if you didn't it was very emotional and quite frankly there wasn't a dry eye in the house.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.