A further drop in the average rate of the most popular US home loan sparked a big jump in refinancing activity in the past week. And that led to the surge in mortgage applications, also helped by a slight bump in purchases activity. Recovery time?
This article was written by Justin Low at www.forexlive.com.
Heavy is the head that wears the crown. The Fed has a very, very big decision to make today. A rate cut is all but confirmed but the major question is by how much? They’ve been suggesting a likelihood of moving by 25 bps since Jackson Hole but market players aren’t listening all too intently. Even if that is what is „expected“ according to estimates from economists, traders are still pricing in considerable odds of a 50 bps move.
So, what will the Fed do later today?
Either way, someone, somewhere is bound to get disappointed. And as is the case when such emotion seeps into markets, expect there to be plenty in the reaction and some significant moves in the aftermath.
The case for moving by 25 bps has been one that Fed policymakers have been outlining since Jackson Hole. The disinflation process is starting to take hold but still moving rather gradually. And there is some softening in labour market conditions but it still largely fits with their soft landing narrative.
So, why the need to push for a 50 bps move?
Well, this is very much markets trying to signal to the Fed they are behind the curve and get policymakers to do their bidding. They tried kicking and screaming in early August and that didn’t work. So, there is a tail risk the carry trade unwind episode could reemerge if the Fed does disappoint certain quarters in the market.
Fed watcher Timiraos contributed to the indecisiveness in markets with his piece last week here. And he added more colour to things yesterday here.
The case in point for a 50 bps move is that the Fed might feel more comfortable in starting off with a bit of a bigger move.
For one, it’ll alleviate suggestions that they are behind the curve and need to do more. Secondly, if economic data is to worsen in the weeks ahead, they’ve at least shown that they are trying to address that in a prompter manner. That as opposed to moving by 25 bps and then not providing much hints about the next move in November.
Nonetheless, the Fed has plenty of ammunition still in the tank. So, to say that they’ve missed the boat in not moving by 50 bps today and that it is all doom and gloom would be misplaced.
I mean, let’s be real. Labour market conditions in the US have shown signs of cooling with some noticeable hiccups or two recently. But other economic data are not screaming out for a significant downturn or recession. As such, a soft landing scenario is still very much valid by all accounts.
If the Fed does stick to its guns, I reckon there will be plenty of kicking and screaming before the week is over. But even if they do make a decision to try and pacify markets, there will be discontent but perhaps not as much given the current pricing. If anything, it’ll be dollar bulls that will be cursing their luck in thinking that the Fed has the cojones to step up when it matters.
But we’ll see what they do later on in the day. Either way, there will be disappointment no matter what the outcome is.
This article was written by Justin Low at www.forexlive.com.
Yesterday, we got some more
positive US data releases as the US retail sales came out a touch better than
expected and the industrial production data beat forecasts erasing the
hurricane related weakness in July.
Despite that, the market is
still pricing a 63% probability for a 50 bps cut at today’s decision. What’s
more important is that the Fed is cutting into a resilient economy which should
lead to better growth expectations and support the stock market.
Russell 2000
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that the Russell 2000 eventually rallied back above the major trendline and extended the gains into the
previous high around the 2250 level. The next target for the buyers should be
the 2300 level where we can expect the sellers to step in to position for a
drop back into the trendline.
Russell 2000 Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we had a very strong rally from the lows as the market looks forward
to the Fed rate cuts and the pickup in economic activity. From a risk
management perspective, the buyers will have a better risk to reward setup
around the 2185 support
zone. The sellers, on the other hand, will want to see the price breaking lower
to pile in for a drop into the 2120 level.
Russell 2000 Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have upward minor trendline defining the current bullish momentum. The
buyers will likely keep on leaning on it to position for new highs, while the
sellers will want to see the price breaking lower to position for a drop into
the 2185 support. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we have the FOMC rate decision, while tomorrow we get the latest US
jobless claims figures.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
Oil Technical Analysis: Failed Breakout and Market Sentiment Shift
The oil market has recently experienced significant volatility, as illustrated in the Light Crude Oil Futures (CL1!) chart. Traders were caught off guard by a failed breakout and a subsequent bearish momentum, which reflects a shift in market sentiment. Here’s a breakdown of the key technical events unfolding.
Failed Breakout and Bull Trap
The chart shows a failed breakout from a bull flag pattern, a bearish signal that typically indicates a reversal in price momentum. After an attempted breakout above the upper resistance, bulls were trapped with the breakout proving short-lived. This led to a swift price reversal, disappointing those who were expecting further upward movement.
The contract rollover to the November futures (CLX2024) adds another layer of complexity to this technical setup. As the contract switched, bullish traders were trapped in their positions, unable to capitalize on expected gains. This failure often creates a scenario where traders rush to close long positions, fueling bearish pressure.
Downward Price Channel
Since mid-August, oil prices have been trending within a descending channel. This sustained downtrend is highlighted by lower highs and lower lows, indicating that bears are currently in control of the market. The recent failed breakout attempt suggests that the downward pressure remains strong, with bulls unable to break free from the prevailing bearish momentum.
At the time of writing, oil prices are hovering around $68.85, representing a 3.29% decline. The failed breakout at $71.19 marked the peak of this brief rally attempt, but the market quickly reversed, confirming resistance at this level.
Bears in Control: Gap Down Confirms Sentiment
The most recent action saw bears taking advantage of a gap down, further solidifying their hold on the market. This gap reinforces the bearish sentiment, with the price now struggling to maintain a foothold around the $68-$69 range. Given the failure to maintain support above $71, traders may expect additional downside movement, potentially targeting previous lows around $65.27.
Moving Forward: Key Levels to Watch
Support at $68.85: The current price is testing this support zone. A break below could open the door for further downside, with the next major support seen near $65.27.
$65.27 Support Level: This represents a critical psychological level that, if broken, could accelerate the downward trend in the oil market.
Conclusion: Bearish Outlook Continues
With the failed breakout from the bull flag pattern and a significant bearish gap down, the current outlook for Light Crude Oil Futures remains bearish. Bulls are struggling to regain control, and until they can break above the key resistance at $71.19, the downward trend will likely persist.
Traders should watch for further downside tests of the support levels mentioned, and any bounce attempts should be monitored for potential short-term trading opportunities.
In this environment, risk management is crucial, as the market remains highly volatile and prone to sudden shifts, particularly with contract rollovers and macroeconomic factors influencing oil prices.
This article was written by Itai Levitan at www.forexlive.com.
Autobauer wie Ford und GM wollten schnell ihr gesamtes Sortiment auf Elektroantriebe umstellen. Doch die Nachfrage steigt kaum. Ein Faktor schreckt Käufer besonders ab.
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Mit dem Fonds über mehr als 30 Milliarden Dollar sollen Rechenzentren und Energieprojekte finanziert werden. +++ Der Newsblog zum Chiphersteller. +++