News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
Oil - US Crude
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • Trading Forex is not a shortcut to instant wealth, excessive leverage can magnify losses, and sentiment is a powerful indicator. Learn about these principles in depth here: https://t.co/lZFM8youtX https://t.co/6qGEVjDlN6
  • Although the medium-term outlook remains negative, Bitcoin could make a bullish move in the coming days if prices manage to hold above key support in the $29,150/28,600 region. Get your #Bitcoin forecast from @DColmanFX here: https://t.co/T7iAD0fbbU https://t.co/xVSG7nKIQG
  • Risk management is one of the most important aspects of successful trading, but is often overlooked. What are some basic principles or risk management? Find out from @PaulRobinsonFX here: https://t.co/IsnpfJhp91 https://t.co/HGWZikGQAa
  • Brush up your knowledge on trade-wars with this tool from DailyFX research briefly outlining trade-war history dating back to the early 1900s here: https://t.co/bZEFtp8kFe https://t.co/2cQ0JgAfh7
  • Crude oil prices collapsed on Monday despite an OPEC+ breakthrough, driven by Covid-induced demand woes. Meanwhile, Gold is at odds with a stronger US Dollar and falling Treasury yields. Get your #crudeoil market update from @FxWestwater here:https://t.co/H1vmag8d1k https://t.co/1zuPdKUmyE
  • AUD/USD is likely to face increased volatility over the coming days as it faces a batch of key event risks going into the end of July. Get your Australian Dollar forecast from @DavidJSong here: https://t.co/qFpg0DCxxL https://t.co/quQxg4WBy3
  • The US Dollar outlook against ASEAN currencies like the Singapore Dollar, Thai Baht, Indonesian Rupiah and Philippine Peso remains bullish amid capital outflows risks as Covid cases swell. Get your market update from @ddubrovskyFX here:https://t.co/vRUVxvQP8o https://t.co/cUEkW9BfIP
  • Is investing in your favorite brand or buying its products the better financial move? Read the article for a breakdown. https://t.co/iWOlDAK8cD https://t.co/0uS5VvWj12
  • Crude oil prices collapsed on Monday despite an OPEC+ breakthrough, driven by Covid-induced demand woes. Meanwhile, Gold is at odds with a stronger US Dollar and falling Treasury yields. Get your #crudeoil market update from @FxWestwater here:https://t.co/H1vmag8d1k https://t.co/PW5pCw9dKR
  • The Japanese Yen has been making a comeback, but it may soon resume its decline against the US Dollar as USD/JPY consolidates within a bullish Falling Wedge. Watch for a breakout. Get your market update from @ddubrovskyFX here:https://t.co/zxRWoNR4lS https://t.co/bXTx0TSRmU
The 3 Scenarios to Consider for the S&P 500 Ahead of FOMC

The 3 Scenarios to Consider for the S&P 500 Ahead of FOMC

Peter Hanks, Strategist

S&P 500 Talking Points:

  • With the S&P 500 teetering at record highs, any indication that the Fed may return to its hawkish leanings of old would shatter the case for equity bullishness
  • The Fed has always stressed data dependence but with strong GDP and weak inflation data, FOMC officials will have to decide which carries more weight
  • See how IG Clients are positioned on the S&P 500 ahead of the FOMC rate decision with Retail Sentiment Data

The 3 Scenarios to Consider for the S&P 500 Ahead of FOMC

The Federal Reserve and its monetary policy path have become an area of contention as the US equity bull market progresses through its tenth year. With some economists lambasting the Fed for its low interest rates and “cheap money” policies, others argue the opposite – saying the bull run is threatened only because of FOMC rate hikes. Either way, May’s FOMC decision is of heightened importance as the S&P 500 teeters at record highs. Here are the 3 scenarios to consider.

A Hawkish Pivot

While some forecasts for the coming quarters remain bleak, the data released thus far is anything but. After first quarter GDP read in a full 1% above expectations, the case for a hawkish pivot could be made. Similarly, many market participants believe the recent shift from the policy path heralded by the Fed in the first half of 2018 arose only because of turmoil in the equity market. With the S&P 500 back in uncharted territory, further easing may be deemed unnecessary. That said, the performance of the stock market is not one of the Fed’s direct duties and something Chairman Jerome Powell has previously stated FOMC officials do not look at.

The 3 Scenarios to Consider for the S&P 500 Ahead of FOMC

Any commentary on potential rate hikes in 2019 or a decision to further unwind the balance sheet – which the Fed said it would pause in September – would effectively lean hawkish. The implications for the S&P 500 would likely be dire as investors see tighter monetary policy weighing on economic activity and therefore corporate profits.

A Dovish Lean

On the other hand, not all data out of the United States suggests the economy is in perfect health. In fact, hours prior to Wednesday’s FOMC decision, US ISM Manufacturing PMI read in at the lowest since October 2016. Further, inflation data reflected by Core PCE read in well below the Fed’s 2% target at 1.3% for the first quarter.

Outside of raw data, there are many global events to consider. Slowing global growth remains a concern, with both Mexico and Canada reporting GDP well beneath expectations. Outside of North America, trade war uncertainties between the US and the world’s other largest economies of China, the EU and Japan remain. Until these are resolved, the Fed may see reason to assist growth in an attempt to stave off a deeper slowdown.

Check out our Second Quarter forecasts for the S&P 500, Dow Jones, Gold and more.

To constitute a dovish lean, FOMC officials would have to completely rule out any hikes in 2019 or announce that the next rate move is a cut. While the former is unlikely to spur a large reaction, the latter would constitute more than a dovish lean and would likely see the S&P 500 surge. But with the Fed constantly stressing data dependence, the third and final scenario may be the most likely.

FOMC Officials Toe the Line

Given the conflicting data and considerable uncertainties derived from the ongoing trade wars, a completely neutral stance is likely par for the course. Officials will be sure to highlight both positive and negative externalities that suggest the Fed stand fast in its policy leanings.

The 3 Scenarios to Consider for the S&P 500 Ahead of FOMC

Source: Bloomberg

If the decision is devoid of any substantial changes, the S&P 500 will look to Chairman Powell’s subsequent press conference to drive price action. His views on the economy and the language he uses to describe areas of interest will be watched with intense scrutiny and could elicit a more discernable view of the Fed’s leaning which would drive the market to consider the first two scenarios.

The 3 Scenarios to Consider for the S&P 500 Ahead of FOMC

Chart prepared by Senior Currency Strategist John Kicklighter

For live webinar coverage of the FOMC decision, join Senior Currency Strategist John Kicklighter at 1:45 PM EST Wednesday. Outside of equities, explore technical setups ahead of FOMC day with analyst Paul Robinson.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more:Why Central Bank Monetary Policy May Fail to Avert Another Market Swoon

DailyFX forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES