FOMC Minutes lifts XAUUSD. USD and Treasury Note yield drop.

Market Recap

EURUSD        ▲ 0.43%         1.1859
XAUUSD        ▲ 0.28%         1,291.72
S&P500          ▲ 0.18%         2,555.24
USDCHF        ▼ -0.33%        0.7093
USDCAD        ▼ -0.45%        1.2458
USDMXN ▼ -0.63%        18.7089

Prices as of previous day instrument closing.

The Minutes of the FOMC held on the 19-20^th of September gave indications that albeit labor market conditions continued to strengthen and real GDP was rising at moderate pace , PCE would be below 2% this year. The median projection for core PCE inflation declined 0.2% from June to 1.5%. In 2018 is expected a core CPE of 1.9%, down 0.1% from June projection. The effects of hurricane Harvey, Irma and Maria could not be estimated as limited data were available, but accordingly to the Minutes, “FOMC participants acknowledge that hurricanes Harvey, Irma and Maria would affect economic activity in the near term”. Balance sheet normalization will be implemented as described in the June Addendum to the Policy Normalization Principles and Plans
US indices made not only a record close, but closed the session on their intraday high, a strong sign of risk appetite as investors evaluated the FOMC Minutes of the 19-20 September with optimism. Inflation, excluding food and energy had declined this year thus the FED target of maximum employment and 2 percent inflation could delay the timing of gradual rate hikes. The DJIA rose 42.21 points or +0.18% to 22,872.89 while the Nasdaq Composite gained 16.3 points or +0.25% and closed at 6,603.54.
The US dollar Index closed at 93.01, -0.29% and EURUSD rose for the third consecutive session. USDJPY closed flat at 112.5 while USDCAD slid. The weakness of the greenback helped EM currencies, as MXN, TRY, ZAR and RUB soared.
XAUUSD and XAGUSD rose, while US 10 year yield slid to 234 bp, down 0.53%. Crude Oil consolidated near 51 $/barrel after Tuesday rally.

US 10 Year Bond Yield

US 10 year bond yield made a double top. Both lower premium and expectations change are keeping yields in their 7 year range below 3%.

CME FEDWatchtool

Yesterday the probability of a rate hike in December went down to 81.7% from 87.8%, as showed by the CME FedWatch tool.

Economic Calendar and Today Session

Thursday October 12, 2017			Forecast	Previous
11:00	EZ	Industrial Production s.a. (Aug; MoM)	0.6%	0.1%
14:30	US	PPI (Sep; MoM)	0.4%	0.2%
14:30	US	Initial Jobless Claims (Oct 6)	250K	260K
14:30	CA	New Housing Price Index (Aug; MoM)	0.2%	0.4%
16:30	EZ	ECB’s Draghi and Fed’s Brainard take part in panel discussion on “Rethinking Macro Policy” at a conference in Washington D.C.
16:30	EZ	ECB’s Praet speaks at JPMorgan Investor Seminar in Washington D.C.
17:00	US	DOE Change in Crude Oil Inventories (Oct 6)	-2400K	-6023K
22:00	EZ	ECB’s Cœuré and Lautenschläger participate in panel discussion at “Rethinking Macro Policy” conference in Washington D.C.

The IMF and the Peterson Institute organise the “Rethinking Macro Policy” conference in Washington D.C., where central bankers from the Fed and ECB are scheduled to speak. The most noteworthy speaker being Draghi at 16:30 CET as he is likely to comment on the pace of policy normalization. He could point out that the eurozone growth has been accelerating and the unemployment dropping. Also planned to talk during this event are Brainard, Cœuré and Lautenschläger. ECB’s Praet is speaking at the JPMorgan Investor Seminar at 16:30 CET.

Economic releases are starting with the Eurozone at 11:00 CET. Uplifting August industrial orders and PMI figures are likely to give the Eurozone’s industrial production reading a boost as it is forecasted to rise 0.6% month-over-month. US weekly initial jobless claims (14:30 CET) are forecasted at 250K, 10K less claims compared to prior week’s figure, as the impact from the hurricanes is starting to disappear from the data. Also at 14:30 CET, is the release of the Canadian new housing price index, estimated to note a small gain of 0.2% from the July’s figure.

Crude oil gained yesterday after OPEC raised the demand forecast in its monthly report. This week’s change in inventories are forecasted to drop by 2.4 million barrels. JPMorgan Chase and Citigroup are releasing their Q3 earnings today. The former’s EPS is expected to rise 6%, while the latter is expected to gain 4%. Trump is also scheduled to speak on the Iran Nuclear Agreement decision.

Technical Analysis

EURUSD (Daily timeframe)

The pair rose above the daily 21 and 55 MA. Next test the supply line that links lower highs in area 1.1910. A breakout could lift EURUSD to 1.2 and then to 1.2092. Below yesterday lows the rate could slide to 1.1660. Beneath this level a selling wave is expected.

US Dollar Index DXY (Daily timeframe)

DXY went below the 38.2% Fibonacci retracement at 93.018 and now is below 93. If today it will close below the 21 and 55 daily MA DXY could test area 92.51. Above 93 the US dollar index could rise to 93.49.

XAUUSD (Daily timeframe)

Gold is gaining ground for the 5^th consecutive session and is trying to rise above both the 21 and the 55 daily MA. A breakout can lift the shiny metal to 1,321 $/oz and then to 1,357. Below 1,262 $/oz it may test the lower side of the channel and the 200 MA in area 1,250.

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