16th September 2015 Currency markets, news and analysis

Forex Market Commentary  

What the world will give now for Crystal Ball.

Nobody wants to trade; we're all waiting the outcome fo the rate hike and this is for certain going to be the watershed for this year. Wall Street doesn't believe that the US Fed has it in them. The Dow emphasized this point by climbing +140.10 +0.84% to come in at 16,739.95 on the front end futures contract. Moreover the Dow is enjoying this respite due to current weakness in the currency USD. The US is at full employment one of the two conditions for rate review. But inflation is a mystery. Retail sales have increased moderately July and August but manufacturing is slowing down and so the full condition for rate review has not been met. But bonds traders believe that it has been met and have already factored in the rate hike across the forward yield curve.

It's make or break time for the remainder of this year. The Chicago Board Options Exchange Volatility Index market volatility indicator (VIX) stands at 22.54 whereas since 1990 the average level is 16.9. Either way we could have a massive equities bear drop as bonds traders believe or we could have bonds prices soaring as equities run a new bull run if the US fed declines to raise rates officially.

Read the following article by Credit Suisse:

http://www.thefinancialist.com/does-volatility-signal-the-end-of-the-bull-market/ 


Credit Suisse favor a hold on official US rates and a US equities consolidation that should take the Dow back up to the 17,500 level. With the Dollar overbought, and an official rate hike not in play the Greenback may come under immediate pressure but not a large sell-off. the USD is largely overbought due to it's rapid ascent earlier this year. But as US equities become bid so too should the US Dollar and so yes here needs to be an adjustment in the currency markets but not so far as a rout. USDX may retrace to the 93 mark to shake off the weaker longs in the market. The EUR/ USD may challenge the 1.15 but with speculators declining net shorts to 60% overall in the futures market we are fast approaching equilibrium with greater reluctance and justification to breach the 1.17 mark. Without a clear signal form the Fed we can expect more pressure on the USD; however economic fundamentals between the Euro zone and the US economy do not point to a convergence of interest rates on both the short and long ends of the forward yield curves for the respective interest rates. Small traders looking for a Euro bounce should be wary of holding EUR/ USD longs the higher we go to the 1.17 mark as equilibrium restores itself in the pair

Read on Bloomberg today:

http://www.bloomberg.com/news/articles/2015-09-16/u-s-index-futures-little-changed-as-fed-begins-policy-meeting


and the real hurt in the US oil industry that saw energy prices collapse with a Saudi oil price war:

http://www.bloomberg.com/news/articles/2015-09-17/kkr-s-samson-resources-files-for-bankruptcy-as-shale-slumps 

In speaking of moving averages; markets are not rational and daily price action volatile, but in the longer run trader expectation and negative sentiment can be collectively summed up through the 50 day moving average. Always look to support and resistance band lines as the key to understanding in the long and short term where prices are converging. Professional technical traders use 50 day and 200 day medium and slow moving averages as fundamental cornerstones for interpreting the direction of price action.

USDX

US Dollar
95.296     -0.029 -0.04%   
Support 94.768     Resistance 95.888
Forward 1 year - 95.824s.

EUR/USD
1.129725     -0.000725 -0.06%
Support   1.12173          Resistance 1.14093
Forward 1 year - 1.14350s.  

Crude Oil  WTI

47.54     +0.03 +0.07%

Support 43.17  Resistance  46.61
Forward 1 year - 50.28s.

Gold

1120.49     -0.39 -0.03%

Support  1,090.2    Resistance 1,118.6
Forward 1 year  -  1,107.9s.

Pieter Bergli - DeLoren Trust Holdings

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