MARKET DEVELOPMENT – USD FIRMS AHEAD OF FED DECISION
USD: The US Dollar is firmer ahead of the FOMC rate decision. Expectations is for the Federal Reserve to raise interest rates by 25bps to 2.00-2.25%. However, with this fully priced in, focus will be on the dot plot projections and the accompanying statement, with many touting that the word “accommodative” could be removed or altered. If indeed the rhetoric is removed, this may signal that the FOMC are reaching the nearing the peak in their policy potentially placing the Dollar on the backfoot. While a lack of new information from the Fed may also disappoint those expecting a hawkish tilt.
Crude Oil: Crude oil futures have eased slightly today, following a surprise build in yesterday’s API report. Focus on the DoE crude report at 1430GMT. However, oil prices remain at elevated levels with concerns over the looming sanctions on Iran, alongside the drop in Venezuelan oil production. With regard to Iran, the second largest importer of Iranian oil stated yesterday that they will reduce Iranian oil purchases to zero from November (Previously imported 500-700k). Elsewhere, with OPEC’s decision to rebuff Trump’s demand to boost output and lower oil prices, markets are preparing for a more direct approach from the President prior to the mid-terms with a potential SPR release.
DailyFX Economic Calendar: Wednesday, September 26, 2018 – North American Releases
DailyFX Webinar Calendar: Wednesday, September 26, 2018
IG Client Sentiment: US OilChart of the Day
Oil - US Crude: Retail trader data shows 46.6% of traders are net-long with the ratio of traders short to long at 1.14 to 1. The number of traders net-long is 12.5% higher than yesterday and 44.5% higher from last week, while the number of traders net-short is 7.8% higher than yesterday and 87.8% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil - US Crude prices may continue to rise. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed Oil - US Crude trading bias.
Five Things Traders are Reading
- “Preview for September FOMC Meeting and Outlook for US Dollar” by Christopher Vecchio, CFA , Sr. Currency Strategist
- “Bitcoin, Ether, Ripple, Litecoin - Charts Mixed and of Interest | Webinar" by Nick Cawley, Market Analyst
- “S&P 500, Dow Jones and Nasdaq Eying Further Gains, Fed Provides Risk” by Justin McQueen, Market Analyst
- “Trading Outlook for EUR/USD, USD/JPY, Gold Price & More” by Paul Robinson, Market Analyst
- “GBPUSD Outlook Buffeted by FOMC Rate Outlook and Brexit News” by Nick Cawley, Market Analyst
--- Written by Justin McQueen, Market Analyst
To contact Justin, email him at Justin.mcqueen@ig.com Follow Justin on Twitter @JMcQueenFX
