Yesterday, the Fed left interest rates unchanged at
5.25-5.50% as expected but revised its outlook on the more hawkish side. In
fact, the Fed not only sees another rate hike by the end of the year but also
much less rate cuts in 2024 as they revised it from 4.6% seen in June to 5.1%
now. The macroeconomic projections were also revised higher indicating a
resilient economy. In the press conference Fed Chair Powell
reaffirmed their data dependency and the need to move carefully as they
approach the terminal rate. One thing that caught everyone by surprise is when
asked if he would call the soft landing a baseline expectation now, Powell said
„No, I would not do that“.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite eventually broke out of the consolidation following the FOMC meeting
and it’s now eyeing the key support at 13174
where we have also the confluence with the
trendline and the
38.2% Fibonacci retracement level.
This is where the buyers should step in with a defined risk below the level to
position for a rally into the highs. The sellers, on the other hand, will want
to see the price breaking through the level to pile in even more aggressively
and target the 12274 level.

Nasdaq Composite
Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the Nasdaq
Composite basically broke out of the bearish flag. The
target for this pattern is generally the equal extension of the first bearish
leg, so we might even see a break below the key support and a selloff into the
12274 level. For now, the bias remains bearish as the price is printing lower
lows and lower highs with the moving averages being
crossed to the downside.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
optimal level to short was after the breakout of the support. The price has
already moved a lot and it’s never a good idea to chase the market. If the
price pulls back, the sellers should lean on the downward trendline and the
previous low to position for another selloff into the 13174 support. The
buyers, on the other hand, will want to see the price to break above the
trendline to invalidate the bearish setup and start targeting new higher highs.

Upcoming
Events

The week is drawing to a
close, but we still have a couple of key economic releases ahead. Today, the main event will be the US Jobless Claims
report as the labour market data remains very important for the Fed and the
market. Tomorrow, we will see the latest US PMIs data which is expected to be
market moving.

This article was written by FL Contributors at www.forexlive.com.

• That is welcome news
• Previous rate hikes are working but inflation is still not where it needs to be
• There is absolutely no room for complacency
• Will be watching closely to see if further rate hikes will be needed
• Will need to keep rates high enough and long enough to get the job done
• Will do whatever is needed to get inflation back to normal

They’re not shutting the door for another rate hike in November but in all likelihood, they may already be done unless we do see a significant tick higher in inflation in the coming months. And if the UK economy continues to worsen at its current pace, that might just shut the door on the BOE itself before they can even consider any more rate hikes in the near future.

This article was written by Justin Low at www.forexlive.com.

The BOE decision to not hike rates today might seem warranted to some extent but it might just end up being a lesson in history if things don’t go their way. The inflation report this week did show signs of slowing inflation but at 6.7%, the UK still sits atop the throne in terms of the inflation ranking among major economies:

*Japan data is an estimate, to be released on 22 September

And the thing to note about all of this is that the BOE is pausing at a time when the economy is beginning to worsen significantly. Yes, that is definitely the prudent step. But when you take into account that markets basically gave them a free pass to sneak in one more rate hike today, it could end up being an opportunity missed for the central bank.

I mean if Q4 conditions end up being as bad or worse than Q3, the argument for a rate hike in November might look like a poor reflection of how the BOE is managing their policy settings. And if that is the case, they risk overtightening into a rapidly declining economy and could just send it over the edge and bringing about a hard landing.

To keep things short, this was perhaps the last chance that the BOE might get to tighten policy further and they did not take it.

And so, therein lies the risks of stagflation in the UK economy with Bailey & co. maybe having no ways of resolving that situation.

This article was written by Justin Low at www.forexlive.com.

In fact, US futures are even extending losses on the day now. Here’s a snapshot of things:

• Eurostoxx -1.4%
• Germany DAX -1.1%
• France CAC 40 -1.4%
• UK FTSE -0.2%
• S&P 500 futures -0.7%
• Nasdaq futures -1.0%
• Dow futures -0.5%

So, what’s the cause for the lack of cheer in stocks even as the SNB and BOE surprised by staying on hold today? Well, it’s all about the bond market.

And 10-year Treasury yields are still keeping higher by 3 bps today to 4.441% at the moment. As bond yields continue to shoot higher, that is going to keep creating more angst for equities. So, just be mindful of that ongoing development when reviewing broader markets and the central bank decisions this week.

This article was written by Justin Low at www.forexlive.com.

And so the BOE now officially joins the ranks of all the other major central banks into pausing their tightening cycle. The gang is complete again, after having seen the SNB surprise earlier in the day as well. So, what exactly is the impact to the pound as the BOE takes a step back from hiking rates?

In terms of OIS pricing, the most evident one is a shift lower in the curve. In other words, traders are not as convinced of that one last rate hike by the BOE now. This was supposed to be a one and done case for the central bank but it now seems like maybe there could be an option where they still hike in November before officially pausing for good.

However, that will be largely dependent on the data in the coming weeks/months.

As things stand, the fact is that the UK economy is worsening at a much rapid pace than anticipated back in May or June. The BOE has also acknowledged that and says that they now see Q3 GDP growth of just 0.1% (previously 0.4%).

The thing is if we see the same kind of unpleasant showing in the economy in Q4, it just makes it that much harder for the BOE to try and convince markets that they can still get away with another rate hike. Otherwise, the risk is that they might overtighten policy and send the economy over the edge and administer a hard landing instead.

We’re not quite at that point of no return yet but with every passing data point and especially if labour market conditions also soften, we are slowly getting there.

The pound has fallen on the initial reaction with GBP/USD down from 1.2295 to 1.2240 but has now recovered some ground to 1.2265. Traders were seeing this as a 50-50 decision coming into today but the fact that the November window is still left open somewhat, means that we’re only seeing a slight shift in pricing odds.

That isn’t as damaging to the pound but it still points to further downside for the currency, especially if economic conditions show no signs of getting any better i.e. traders will have to keep slowly pricing out odds of another rate hike eventually.

This article was written by Justin Low at www.forexlive.com.

Ethereum continues
to consolidate around a key support turned resistance maintaining a bearish
bias as the uncertainty around the future outlook is now at its highest levels.
On one hand, we have some resilience in the economies with the inflation rates
slowly normalising, but on the other hand, we have signs of weakening growth
and the central banks committed to keep monetary conditions tight for a long
time. The technicals should help with the risk management until we start to get
a clearer direction on the fundamentals side.

Ethereum Technical Analysis
– Daily Timeframe

On the daily chart, we can see that Ethereum
recently bounced on the previous low and rallied into the downward trendline where it
found resistance. This is where we should see the sellers piling in with a
defined risk above the trendline to target a new low. The buyers, on the other
hand, will want to see the price breaking above the trendline to position for
more upside and start targeting the highs.

Ethereum Technical Analysis
– 4 hour Timeframe

On the 4 hour chart, we can see that the price has
been diverging with the
MACD as it
approached the trendline and the resistance at 1681.
This is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we should see a pullback into the black trendline
where the buyers are likely to step in with a defined risk below the trendline
to target new higher highs. The sellers, on the other hand, will want to see
the price breaking below the trendline to pile in and target the low first and
eventually a break lower.

Ethereum Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can see that at
the moment the price action is a bit messy as we are hovering around key
resistances. The best strategy would be to wait for a clear breakout as
rangebound markets can chop traders out.

Upcoming Events

This week has a few important economic releases that can
have an impact on Ethereum. Today, the Fed is expected to keep rates unchanged
with the market focusing more on the Dot Plot and Powell’s press conference,
where he’s likely to reaffirm their data dependency. Tomorrow, we will get the
latest US Jobless Claims report and much worse than expected data should weigh
on Ethereum due to recessionary fears while much better-than-expected figures
are likely to weigh on the cryptocurrency due to risks of more tightening from
the Fed. Finally on Friday we conclude the week with the US PMIs data with the
same playbook as for the Jobless Claims, that is, weak data is likely to send
the markets into risk off and lead to weakness in Ethereum, while strong data
should weigh due to a more hawkish repricing in rates.

This article was written by FL Contributors at www.forexlive.com.

• UK August CPI +6.7% vs +7.0% y/y expected
• A one and done case for the BOE now?
• BOE rate hike odds for this week now a near coin flip
• BOE likely to keep bank rate unchanged tomorrow – Goldman Sachs
• ECB’s de Cos: Risks to inflation in the euro area are now balanced
• Talk of $100 too hot to handle for oil bulls?
• Japan former top currency diplomat warns of intervention if the yen falls further
• Switzerland ups economic growth forecast for the year but revises lower 2024 projection
• US MBA mortgage applications w.e. 15 September +5.4% vs -0.8% prior

Markets:

• NZD leads, GBP lags on the day
• European equities higher; S&P 500 futures up 0.2%
• US 10-year yields down 2.2 bps to 4.344%
• Gold flat at $1,930.84
• WTI crude down 0.6% to $89.93
• Bitcoin down 0.3% to $27,089

With the Fed in focus, markets were prepared a slower session but the UK inflation surprise to the downside did help to provide some action at least.

A softer set of inflation numbers saw the pound fall as traders firmed up their conviction for just one more rate hike to come by the BOE during this cycle. The notable drop in price pressures are also feeding into some calls that the BOE may not even raise interest rates this week.

GBP/USD fell from 1.2385 to 1.2335 and the broader market reaction also saw equities move up a little while bond yields fell in the aftermath. The moves in turn are weighing on the dollar slightly and that helped to see GBP/USD recover back to 1.2365 currently.

Meanwhile, EUR/USD is up 0.2% to near 1.0700 with EUR/GBP up 0.4% to 0.8650 levels – its highest in nearly six weeks. The commodity currencies are the ones benefiting the most with AUD/USD up 0.5% to 0.6485 while NZD/USD is also up 0.5% to 0.5965 at the moment.

In the commodities space, gold is flattish awaiting the Fed while oil prices saw a dip in Asia trading below $90 and is sticking thereabouts for the time being.

It’s now over to the FOMC meeting decision to jolt markets back awake for the remainder of the week.

This article was written by Justin Low at www.forexlive.com.

If you only have one chart that you can watch in trying to make sense of the FOMC meeting decision later today, this would be my pick.

Despite the Fed saying that they are in pause mode while looking to hold rates higher for longer, Treasury yields have been on the rise and even briefly hitting its highest levels since 2007 earlier this week in the case of 10-year yields.

This arguably remains the most important spot to watch in trying to gauge how the Fed decision impacts broader market sentiment, so let’s discuss the possibilities and potential.

The Fed decision in itself is a given, in that they will not be raising rates today. But instead, the most important things will continue to be the language and communication – which I would expect to be similar to the last meeting.

Policymakers are likely to allude to being data dependent and with the US economy staying rather resilient so far, there’s no reason to mess with things for now. If it ain’t broke, don’t try to fix it.

Meanwhile, the next thing to watch today will be the economic projections and dot plots. The latter will now be of less importance in my view but the former will be something to be mindful of.

If the Fed continues to see the economy as staying more resilient and the data supports that view, that is good reason to keep expecting yields to stay higher for longer alongside interest rates. And in turn, that will keep the dollar underpinned in the big picture.

And if we do get a breakout higher in 10-year yields above 4.36%, there might be more pain in markets especially for equities especially with higher oil prices also a concerning factor.

This article was written by Justin Low at www.forexlive.com.

• Prior -0.8%
• Market index 192.1 vs 182.2 prior
• Purchase index 147.0 vs 143.7 prior
• Refinance index 415.4 vs 367.0 prior
• 30-year mortgage rate 7.31% vs 7.27% prior

Despite a further rise in the average rate of the most popular US home loan, mortgage applications rose in the past week – largely helped out by a big jump in refinancing activity. Purchases were also higher but very slightly, though the overall picture remains rather subdued against the backdrop of higher interest rates for now.

This article was written by Justin Low at www.forexlive.com.

Bitcoin might be stuck in a major range between the
25231 support and the 31044 resistance as the uncertainty around the future
outlook is now at its highest levels. On one hand, we have some resilience in
the economies with the inflation rates slowly normalising, but on the other
hand, we have signs of weakening growth and the central banks committed to keep
monetary conditions tight for a long time. The technicals should help with the
risk management until we start to get a clearer direction.

Bitcoin Technical Analysis
– Daily Timeframe

On the daily chart, we can see that Bitcoin bounced
again on the key 25231 support and
rallied into the downward trendline where it
found a strong resistance. This is where we can expect the sellers to pile in
with a defined risk above the trendline to target a break below the key
support. The buyers, on the other hand, will want to see the price breaking
above the trendline to target the highs again.

Bitcoin Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price has
been diverging with the
MACD while it
approached the trendline. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, we should see a pullback into
the black trendline where the buyers will pile in with a defined risk below the
trendline to target a break above the major downward trendline and new higher
highs. The sellers, on the other hand, will want to see the price breaking
below the trendline to confirm the reversal and position for a selloff into the
key support.

Bitcoin Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can see more
closely the support zone around the black trendline and the 26800 level.
There’s nothing to do at the moment other than waiting for a pullback or a
breakout.

Upcoming Events

This week has a few important economic releases that can
have an impact on Bitcoin. Today, the Fed is expected to keep rates unchanged
with the market focusing more on the Dot Plot and Powell’s press conference,
where he’s likely to reaffirm their data dependency. Tomorrow, we will get the
latest US Jobless Claims report and much worse than expected data should weigh
on Bitcoin due to recessionary fears while much better-than-expected figures
are likely to weigh on the cryptocurrency due to risks of more tightening from
the Fed. Finally on Friday we conclude the week with the US PMIs data with the
same playbook as for the Jobless Claims, that is, weak data is likely to send
the markets into risk off and lead to weakness in Bitcoin, while strong data
should weigh due to a more hawkish repricing in rates.

This article was written by FL Contributors at www.forexlive.com.