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Video: Dollar Extended Before Fed, Bitcoin and Oil Forge Breaks

Video: Dollar Extended Before Fed, Bitcoin and Oil Forge Breaks

2017-07-26 01:10:00
John Kicklighter, Chief Strategist
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Talking Points:

  • The Dollar was showing some nervous energy before the FOMC decision, but there was little effort to ease back on shorts
  • The Fed decision is top billing Wednesday, but its potential is measured; the Aussie CPI and UK GDP should be on radar
  • As we await clear fundamental cues for Dollar, SPX, Pound, Aussie and more; Oil and Bitcoin have made due with technical

I will be covering the FOMC rate decision live starting 15 minutes before the decision is expected. Sign up to join the event on the DailyFX Webinar Calendar page.

There was a sense of nervous anxiety in the markets this past session as speculative interests were turned forward to the upcoming sessions' high level event risk. Neither the Dollar nor the S&P 500 made significant progress on their respective trends (bearish and bullish), but there were certainly evidence of volatility that often shows when there is considerable anticipation in the rank. What is remarkable was the lack of retracement or correction in the one-sided trends that have developed through 2017. Usually when there is an event that can exert serious influence on the market, there is an effort to reduce some of the speculative excess in positioning. That didn't happen with the Dollar temporarily plunging a new 13 month low and the S&P 500 gapping (with no follow through) on the open to a record high. This suggests traders are writing the event off - dangerous given the degree of resting complacency already prevailing in the system.

Through this past session, there was some fundamental confidence to be drawn from the headlines. For the Dollar and general investor sentiment, the US confidence survey from the Conference Board showed an unexpectedly intense jump. While it didn't surpass the 16 year high set earlier in the year, it is very close to it. Further, the details of the survey were uniformly encouraging. This is an encouraging reading for the Federal Reserve which can take it as evidence that they can continue to push forward with their gradual tightening regime. It can also be read as confidence in the economic and business-friendly proposals by the Trump administration (infrastructure spending and tax reform) that have stalled in the past months. On a different wave length, earnings was another factor at play for shares specifically. Google's beat was not read as particularly encouraging for FAANG and the tech sector, but reports from the likes of CAT and McDonald's made up for it.

Outside headlines, there were also remarkable volatility developments for certain markets that seemed unperturbed by the wait-and-see mentality surrounding the Fed decision. Crude oil posted a clear bullish break from a triangle pattern while Bitcoin and Ethereum resolved very explicit wedges with a bearish move. We can ascribe fundamental sparks to these moves, but it is more likely that speculative interests follow and responded to the technical lines. That will limit follow through without further fundamental drive. Ahead, the FOMC decision is the primary concern. The Strategy Video goes into detail about the event's particulars and market potential; but there are general take-aways all traders should be mindful of. This is unlikely to be a bombastic event, which means the nuance of the policy statement will matter. There are inherently outcomes for this event which can produce significantly larger moves so traders should be wary. And, though the Fed's ruling will dominant the headlines, we should also consider the Australian CPI and UK GDP figures for sway on the Aussie and Sterling. We discuss all this major event risk and its market moving potential in today's Trading Video.

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Video: Dollar Extended Before Fed, Bitcoin and Oil Forge BreaksVideo: Dollar Extended Before Fed, Bitcoin and Oil Forge BreaksVideo: Dollar Extended Before Fed, Bitcoin and Oil Forge BreaksVideo: Dollar Extended Before Fed, Bitcoin and Oil Forge Breaks

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

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