The Fed’s interest rate decision, front and center

Fed expected to remain on hold

The market’s focus is centred on the Fed’s interest rate decision.

The bank is widely expected to remain on hold with the market’s expectations for the Fed to hike rates in September being high, while the bank is also expected to hike rates in December. The bar is currently high for the Fed, and a sufficiently hawkish tone and signals in its forward guidance could provide some support for the USD, while at the same time could weigh on US stock markets and gold’s price. On the flip side, should the Fed fail to sound as hawkish as expected, we may see the USD losing ground and US equities and gold’s price gaining. We intend to focus on the bank’s accompanying statement, the new dot plot and Fed Chair Warsh’s press conference, as key sources for any signals about the Fed’s intentions.

Earnings reports to be released today

Besides the Fed’s interest rate decision, US equity markets are expected to also keep a close eye on the release of the earnings reports of Meta Platforms and Microsoft in today’s after-market hours. Besides the EPS and revenue figures to be reported, market participants are expected to keep a close eye also on the companies’ AI spending plans, with market worries ongoing about overleveraging and liquidity.  

Oil prices edge higher

Oil prices edged higher yesterday. Expectations for OPEC to pause oil production hikes after September, the tightening of the US oil market and the US strikes on Iran-backed groups in Iraq, all may have supported oil prices on a fundamental level. Oil market focus remains on the US-Iran conflict, and a possible escalation of tensions could lift oil prices and vice versa.

Gold’s price remains steady

Gold’s price remained relatively stable ahead of the Fed’s interest rate decision. On a longer perspective regarding the precious metal’s outlook, we note that analysts tend to cut their forecasts for gold’s price given the wide pullback since the end of January. Central bank gold buying is ongoing, possibly cushioning the drop, while the Fed’s intentions remain central regarding gold’s direction.

Other highlights for today

Today we get Sweden’s preliminary GDP rate for Q2 and the US EIA weekly crude oil inventories figure. In tomorrow’s Asian session, we get Australia’s building approvals for June.

Charts to keep an eye out

USD/JPY remained stable just above the 162.80 (S1) support line. We maintain our bullish outlook for the pair and intend to keep it as long as the upward trendline guiding it remains intact. The RSI indicator edged lower yet remains at relatively high levels, which suggests the continuance of a bullish market sentiment. Should the bulls remain in charge, USD/JPY may aim for the 165.50 (R1) resistance base. Should the bears take over, USD/JPY may break the prementioned upward trendline in a first signal of an interruption of the pair’s upward movement and continue to break also the 162.80 (S1) line and aim for the 160.50 (S2) level.

Nasdaq continued to drop aiming for the 26870 (S1) support line. We maintain a bearish outlook for the index as long as the downward trendline continues to lead it. The RSI indicator, is nearing the reading of 30, implying an intensifying bearish market sentiment which could drag the index’s price action lower. Yet the price action is flirting with the lower Bollinger band, which may slow down the bears or even cause a correction lower. Should the bears continue to lead the index we may see it breaking the 26870 (S1) support line. Should the bulls take over, we may see the index breaking the prementioned downward trendline and continue to break the 28200 (R1) line and start aiming for the 28675 (R2) resistance level.

Calendar follows

USD/JPY daily chart

• Support: 162.80 (S1), 160.50 (S2), 157.50 (S3).
• Resistance: 165.50 (R1), 168.00 (R2), 171.60 (R3). 

US100 Cash daily chart

• Support: 26870 (S1), 25375 (S2), 23965 (S3).
• Resistance: 28200 (R1), 28675 (R2), 30770 (R3).