Saturday, 17 September 2016

USD rising ahead of the FOMC

US equities closed moderately weak, sp -8pts @ 2139 (intra low 2131). The two leaders - Trans/R2K, settled lower by -0.4% and -0.2% respectively. VIX settled -12.2% @ 15.37. Near term outlook offers further chop, with the market set to remain broadly stuck within the 2120/50 zone, until the FOMC announcement.




Quad-opex naturally saw a lot of chop, leaning on the moderately weaker side.

However, the VIX did reflect underlying market confidence, as it cooled into the weekend, which resulted in a significant net weekly decline.. having briefly seen the 20s in pre-market on Monday.

I will note there is a threat of the sp'2070/50 zone - where there are multiple aspects of support. That would likely require the fed to raise rates next Wednesday, and frankly.. that just doesn't seem at all likely.

I remain of the view the fed won't raise until the Dec' FOMC, which would be a far simpler time, not least as the US election will be out of the way.

USD, weekly'2

A net weekly gain of 0.8%, settling at DXY 95.99.

RE: H/S scenario. Any break above DXY 96.25 next week would provisionally trash the scenario. A break <94.75 would break the mid term rising trend from May, and would open the door to the 92.00-91.50 zone before year end.

My best guess remains the same... no rate hike until December. If correct, it'd give the USD the excuse for further cooling across Oct/early Dec', before a bounce into early 2017, and then significant weakness across the summer/autumn.

By definition, the H/S scenario offers the DXY 83/82s. I understand how that could be seen by many as crazy talk. First things first... lets see how the USD trades with next week's Fed decision.

Goodnight from London

*the weekend post will appear Sat' 12pm EST