Will Fed Inaction Doom Dollar Rally?
Today’s Spotlight Market
The economic calendar is relatively light for the remainder of the week, but we will see significant market interest in the release of the September FOMC minutes on Thursday afternoon. In addition, on Thursday we will get the latest data on initial jobless claims for the week ending October 3, along with the 4-week average for continuing jobless claims.
Fundamentals
Last week?s ?disappointing? U.S. Non-Farm Payrolls report added additional credence to the belief being held by many traders that the Federal Reserve will not move to raise interest rates in 2015. This view exerted pressure on the value of the U.S. Dollar during the past week, as traders exited long positions that were established on the basis of higher U.S. interest rates in the coming weeks. While we have seen many Fed officials continue to talk of the likelihood of a rate hike at the December Federal Open Market Committee (FOMC) meeting scheduled for mid-December, mixed economic data on top of the weak jobs number may be enough to convince the Fed to maintain the current accommodative rate policy into 2016. Fed Funds futures traders have all but nixed the possibility of a rate hike at the October 27-28 FOMC meeting, with the October Fed Funds futures pricing-in only a 6% chance of a rate hike. For December, the odds of a rate hike increase, but futures are only looking at a 31% probability at the December meeting. It is not until the March 2016 meeting where the Fed Funds futures are looking at an over 50% chance of a rate hike. As we all know alot can happen in the global economy in the next 6 months, so traders should be prepared for continued market volatility going into the New Year.
Technical Notes? -? View Today’s Chart
Looking at the weekly continuation chart for Dollar Index futures, we notice the market making a series of lower highs since the market made 12-year highs back in March. Prices are currently holding near the 20-week moving average, as we appear to be in the midst of a consolidation phase. The 14-week RSI has turned neutral, with a current reading of 52.70.? We do see chart support near 92.35 for the front-month futures with resistance found near 98.45.?
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