AUD/JPY technical analysis: Buyers lurk around 1-week-old support-line de…

  • AUD/JPY takes the bids to recent range resistance following another bounce from immediate support-line.
  • A rising trend-line from August 25 will gain sellers’ attention on the downside break of nearby support.
  • 74.29/30 continues to restrict the pair’s upside since the week’s start.

AUD/JPY registers another bounce off one-week-old rising trend-line but still fails to overcome the weekly range while trading near 74.27 during the initial Asian session on Wednesday.

The quote needs to overcome 74.29/30 area in order to challenge the monthly top surrounding 74.50, a break of which holds the gate for additional upside towards 75.13/20 region comprising multiple highs and lows marked during July.

It should, however, be noted that 12-bar moving average convergence and divergence (MACD) indicates bearish signal and hence a downside break of immediate support-line, at 73.95 now, could trigger fresh declines.

In doing so, an upward sloping trend-line since August 25, at 73.08, becomes the key as a break of which can fetch the quote towards late-August highs surrounding 72.40.

AUD/JPY 4-hour chart

Trend: sideways

 

 

How Gold, Oil, Stocks & USD Perform After FOMC Rate Cuts Start

FEDERAL RESERVE RATE CUT CYCLES & MARKET PERFORMANCE – SUMMARY POINTS:

  • The Federal Reserve is expected to announce its second interest rate cut this year and stands to confirm the central bank’s shift toward increasingly dovish monetary policy
  • FOMC rate cuts have historically produced mixed returns across assets like gold, crude oil, the S&P 500 and US Dollar
  • Check out our free educational guide discussing strategies behind Trading Forex News

The Federal Reserve is slated to deliver its latest monetary policy update Wednesday at 18:00 GMT. Markets widely anticipate the FOMC to cut its benchmark interest rate by 0.25% as central banks around the world loosen financial conditions. Dovish action by the Fed and other central banks have primarily sought to combat signs of economic weakness and sustain the current expansion in light of staggering risks that stem largely from the US-China trade war and rising geopolitical instability.

On that note, the July Fed meeting revealed the FOMC’s first interest rate cut in over a decade. The move came subsequent to a dramatic shift in the Federal Reserve’s language and forward guidance compared to this time last year. In fact, the median estimate for the 2019 federal funds rate (FFR) was previously listed as 3.1% according to the September 2018 economic projections provided by Fed members, while the most recent forecast provided this past June sees the FFR at 2.4%. Yet, the current target federal funds rate range sits at 2.00-2.25%.

IS THE FED ENTERING A CYCLE OF INTEREST RATE CUTS?

The Federal Reserve’s stated dual mandate that governs the central bank’s decisions encompasses price stability and full employment. While the downside risks chiefly contributing to slowing global GDP growth remain unresolved, the potential that economic fundamentals deteriorate further cannot be discounted and may encourage additional interest rate cuts down the road – regardless of what Wednesday’s FOMC decision reveals.

Correspondingly, with inflation continuing to run below the Fed’s target amid fermenting recession fears induced by the recent US Treasury yield curve inversion, the central bank will likely press onward by lowering borrowing costs in hopes of incentivizing consumption and business investment. That said, another Fed rate cut could suggest the scale is tipping away from a “mid-cycle adjustment” in lieu of a full-blown series of accommodative policy measures. Alas, in a sequel to our original analysis on stock market returns when the Fed cuts rates, the tables and graphs below detail how various assets like gold, crude oil, the S&P 500 and US Dollar have historically performed when the Fed enters a cycle of interest rate cuts.

GOLD PRICE RETURNS WHEN THE FED CUTS RATES

Gold Price Returns During Fed Rate Cut ChartHow Gold, Oil, Stocks & USD Perform After FOMC Rate Cuts Start

CRUDE OIL PRICE RETURNS WHEN THE FED CUTS RATES

Oil Price Returns During Fed Rate Cut ChartFOMC Rate Cut and Oil Price Performance Chart

S&P 500 INDEX RETURNS WHEN THE FED CUTS RATES

Stock Price Returns When Fed Cuts Rates TableFOMC Rate Cut and S&P 500 Index Performance Chart

DXY US DOLLAR INDEX RETURNS WHEN THE FED CUTS RATES

US Dollar price returns during Fed rate cut tableFOMC Rate Cut and US Dollar Index Performance Chart

— Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

S&P 500 Forecast: SPY ETF Sees Largest Outflow in 11 Months Ahead of Fed

S&P 500 Price Chart Forecast

S&P 500 Forecast: SPY ETF Sees Largest Outflow in 11 Months

Markets and investors alike are expressing apprehensiveness on Tuesday as time runs out until the highly anticipated September FOMC meeting on Wednesday. Largely responsible for much of the optimism surrounding the Index, dovish expectations have been heightened as the meeting approaches but not all are convinced the Fed can deliver as futures pricing suggests the market’s dovish convictions are slipping. At present, the odds of a 25 basis point cut stand narrowly above 50% – down from the nearly certain 99% just weeks ago. Consequently, the SPY ETF has seen drastic inflows and outflows in recent days as investors place their bets ahead of a decision with immense market-moving potential.

S&P 500 Price Chart & SPY ETF Flows

S&P 500 price chart forecast

Data source: Bloomberg

To that end, Monday saw investors pull over $6 billion out of the SPY ETF in the largest intraday outflow since October 2018 when over $6.6 billion fled elsewhere. To be sure, the fund has been dominated by a string of inflows throughout September as SPY racked up a total of $6 billion in net inflows during the period – assisted by Friday’s inflow of $5.5 billion which was the largest net inflow since January. Thus, an outflow of such magnitude given the proximity to the meeting could suggest a late change in attitude among investors that may hint more investors are becoming uncertain the Fed will be unable to meet the market’s expectations.

It is also possible the outflow was spurred, at least in part, by the attack on the Saudi Aramco facilities that sparked a crude oil price rally. Either way, the capital flows and deadlocked price action suggest the market is anything but certain heading into the September Fed meeting, which is somewhat concerning given that the VIX rests at a modest 14.5.

VIX Price Chart Overlaid with the SKEW Index

vix price chart and S&P 500 chart

Created with TradingView

With so much at stake and a depressed “fear gauge,” the potential for an outsized move is heightened. That potential is in turn reflected in an elevated SKEW Index. The Index attempts to calculate the possibility of a move outside one standard deviation and has crept to levels similar to that of late July – around the time of the previous FOMC meeting. With that in mind, waiting on the sidelines until the event has passed may prove to be a prudent play and that same strategy could be why the SPY ETF saw such a large outflow ahead of the Fed meeting tomorrow.

As the decision approaches, be sure to keep a watchful eye on the situation by following @PeterHanksFXon Twitter. Alternatively, the weekly equity webinar “Dow Jones and DAX 30 Levels to Watch Ahead of the Fed,” will precede Wednesday’s event. There we will talk technicals, commentary to look for alongside other equity markets.

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

Contact and follow Peter on Twitter @PeterHanksFX

Read more:Dow Jones, DAX 30, FTSE 100, S&P 500 Forecasts for the Week

Personal Finance Daily: Could a spike in gas prices scare Americans into …






Happy Tuesday, MarketWatchers. Don’t miss these top stories:

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Felicity Huffman’s 11th-hour letter to judge contained one glaring omission about her role in the college-admissions scandal

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Could a spike in gas prices scare Americans into a recession?

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Jacob Passy is a personal-finance reporter for MarketWatch and is based in New York.


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CFTC Charges Operator of Three Binary Options Brands with Fraud

The US Commodity Futures Trading Commission (CFTC) today charged the operator of Option Mint, Option King, and Option Queen brands in a case involving a fraudulent binary options scheme.‎

Ohio resident Jared Davis has been arrested and charged for allegedly defrauding investors through an elaborate international scheme that the CFTC says he ran out of Sandusky between 2012 and 2016. Davis was taken into custody by agents from the FBI and the IRS at Cleveland Hopkins International Airport back in June 2018.

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The CFTC filed its complaint in the U.S. District Court for the Northern District of Ohio charging Davis and his entities with fraud relating to the scheme involved over $10 million in fraudulent solicitations. Now, the agency wants penalties, disgorgement of ill-gotten gains, and permanent injunctions.

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According to the regulator, Davis is indicted on two separate cases that carry over 20 charges, including wire fraud, money laundering, obstruction of justice, tax evasion and other crimes.

False names and qualifications

The court papers show that he was the leader of a binary options scheme that operated under various trade names, all were tied to a firm called Erie Marketing LLC. Not only Davis’ business was not registered with the US relevant regulators, but also he wasn’t connecting investors to a legitimate exchange. Instead, he was taking the opposite position, making money only when his investors lost money, similar to a casino or sports bucks.

Davis’ employees also falsely guaranteed profits, lied about their professional qualification, and misrepresented trading terms such as bonuses and risk free trades.

Today’s action is the latest in the US crackdown on binary options operatives after a series of reports uncovered massive fraud in the shady industry that had been centered in Israel. Last month, Lee Elbaz was convicted by a federal jury in connection with a vast binary options scheme to defraud investors all over the world. The fraud perpetrated by Yukom CEO, however, was more extensive and widespread as they swindled nearly 75,000 investors out of more than $145 million.

S&P 500 Forecast: SPY ETF Sees Largest Outflow in 11 Months Ahead of Fed

S&P 500 Price Chart Forecast

S&P 500 Forecast: SPY ETF Sees Largest Outflow in 11 Months

Markets and investors alike are expressing apprehensiveness on Tuesday as time runs out until the highly anticipated September FOMC meeting on Wednesday. Largely responsible for much of the optimism surrounding the Index, dovish expectations have been heightened as the meeting approaches but not all are convinced the Fed can deliver as futures pricing suggests the market’s dovish convictions are slipping. At present, the odds of a 25 basis point cut stand narrowly above 50% – down from the nearly certain 99% just weeks ago. Consequently, the SPY ETF has seen drastic inflows and outflows in recent days as investors place their bets ahead of a decision with immense market-moving potential.

S&P 500 Price Chart & SPY ETF Flows

S&P 500 price chart forecast

Data source: Bloomberg

To that end, Monday saw investors pull over $6 billion out of the SPY ETF in the largest intraday outflow since October 2018 when over $6.6 billion fled elsewhere. To be sure, the fund has been dominated by a string of inflows throughout September as SPY racked up a total of $6 billion in net inflows during the period – assisted by Friday’s inflow of $5.5 billion which was the largest net inflow since January. Thus, an outflow of such magnitude given the proximity to the meeting could suggest a late change in attitude among investors that may hint more investors are becoming uncertain the Fed will be unable to meet the market’s expectations.

It is also possible the outflow was spurred, at least in part, by the attack on the Saudi Aramco facilities that sparked a crude oil price rally. Either way, the capital flows and deadlocked price action suggest the market is anything but certain heading into the September Fed meeting, which is somewhat concerning given that the VIX rests at a modest 14.5.

VIX Price Chart Overlaid with the SKEW Index

vix price chart and S&P 500 chart

Created with TradingView

With so much at stake and a depressed “fear gauge,” the potential for an outsized move is heightened. That potential is in turn reflected in an elevated SKEW Index. The Index attempts to calculate the possibility of a move outside one standard deviation and has crept to levels similar to that of late July – around the time of the previous FOMC meeting. With that in mind, waiting on the sidelines until the event has passed may prove to be a prudent play and that same strategy could be why the SPY ETF saw such a large outflow ahead of the Fed meeting tomorrow.

As the decision approaches, be sure to keep a watchful eye on the situation by following @PeterHanksFXon Twitter. Alternatively, the weekly equity webinar “Dow Jones and DAX 30 Levels to Watch Ahead of the Fed,” will precede Wednesday’s event. There we will talk technicals, commentary to look for alongside other equity markets.

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

Contact and follow Peter on Twitter @PeterHanksFX

Read more:Dow Jones, DAX 30, FTSE 100, S&P 500 Forecasts for the Week

Will War Drums, Inflation Fears Ignite Gold and Silver Markets?

By Money Metals News Service

Monday’s spike in crude oil prices could be a game changer – for geopolitics, for the economy, and for investors.

Normally it would be foolhardy to draw big, sweeping conclusions from a single day’s trading activity.

Oil Prices Up

But in this case, it’s not just the fact that oil prices surged 13% to over $62/barrel. Or even the fact that more than 5% of the world’s oil producing capacity suddenly got taken offline.



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The world can cope with volatility in the energy market. An increasingly volatile environment for all assets presents much greater challenges.

But few investors are positioned to cope with the rising risk of war in the Middle East. Few are prepared for the prospect of persistently higher energy prices and higher inflation. Even fewer are taking steps to insulate their portfolios from future black swan events.

Black swans by their nature are impossible to predict. No one saw a devastating drone strike on Saudi Arabian oil production facilities coming.

Delivering the biggest single blow in history to the global oil supply turned out to be surprisingly easy.

Unfortunately, it may be just as easy for terrorists or rogue states to target electrical grid infrastructure, nuclear power facilities, computer systems, or gatherings of world leaders. A single, crudely executed strike could not only inflict disproportionate damage to the global economy but also potentially trigger a full-scale war.

President Donald Trump says the United States is “locked and loaded,” ready to attack Iran for its alleged role in shuttering the Saudis’ oil facilities.

Measuring the Risks

Republican Senator Lindsay Graham is suggesting we bomb Iranian oil refineries in retaliation – a move that could trigger another oil price spike and possibly provoke a Russian response.

Things have escalated rapidly since President Trump controversially planned – then cancelled – a meeting with the Taliban last week. He then proceeded to fire his national security advisor, John Bolton, who had been pushing for war with Iran.

That upset some of the war hawks on Capitol Hill. But the sudden attack on our putative ally Saudi oil machinery gives them one of their best opportunities to push Trump toward war.

How can investors best position for rising risk factors in heretofore sanguine markets?

Monday’s dramatic market moves offer some guidance. Energy stocks surged. Gold and silver gained 0.8% and 2.5%, respectively, on safe-haven buying.

The major stock market averages fell, but only modestly. There was no indication of panic selling taking hold.

Of course, the government’s Plunge Protection Team had the weekend to get circuit breakers on the exchanges in place. President Trump also vowed the U.S. would stand ready to tap the Strategic Petroleum Reserves if necessary to boost oil supplies.

Investors appear to still be largely complacent when it comes to the threat of future oil spikes.

For the past few years the conventional wisdom has been that oil supplies are plentiful and therefore prices should remain low. But those low prices reflected, to some extent, complacency about geopolitical risks.

Low oil prices have wrecked many marginal producers. Frackers and deep-sea drillers have been practically obliterated during a brutal bear market for the oil and gas sector that extended into this summer. It could leave a legacy of severe under-investment in oil production capacity.

The last five recessions were each preceded by a run-up in crude prices of at least a 90%, according to DataTrek Research. A one-day spike won’t trigger a recession, but we are very late into the economic cycle where the energy sector typically assumes leadership, before the economy and stock market roll over.

A surge in oil prices would put the Federal Reserve in a tough position. Rising energy costs hurt consumers and raise the odds of a recession. But if the Fed tries to help the economy by stimulating, it risks pushing energy prices, and price inflation more broadly, even higher.

If the Fed cuts rates again this week as expected, it will be betting that the oil spike is transitory and that inflationary pressures remain well contained.

The markets will have their say after the central bank releases its policy statement on Wednesday. If investors sense monetary policy is heightening inflation risk, they will likely bid up precious metals.

Physical precious metals are, in a very real sense, a form of stored energy. It takes an immense amount of energy to mine ore from the earth and refine it into lustrous gold and silver coins you can hold in your hand.

Higher energy and labor costs will ultimately translate into higher production costs for metals and higher spot prices. A surge in safe-haven demand from investors could have an even bigger, more immediate impact.

Perhaps one day headlines will appear throughout the mainstream media describing gold and silver price shocks that nobody saw coming.

 


The Money Metals News Service provides market news and crisp commentary for investors following the precious metals markets.

Fed Preview: Dollar could be at a turning point if Powell capitulates

The Fed is expected to deliver a second consecutive rate cut in what is still technically considered Powell’s mid-cycle adjustment.  The big question for market participants is whether the Fed will commit to more cuts.  The bond market is still screaming for more cuts to come, with the yield on 10-year Treasuries still well below the Fed funds target range.

–          Optimism growing for Powell to deliver a dovish cut
–          Will it be an extended mid-cycle adjustment or an easing cycle?
–          Fed’s Repo move signals more easing tools may be on their way

Recent Fed speak from Rosengren, Williams and Kaplan have dampened easing cycle bets, but weakness in the labor market is starting to appear, manufacturing is trending lower, and declining confidence, support calls for a much more accommodative stance.  The Fed will also have to look at their peers and decide do they want to disrupt a global wave of easing efforts that is trying to fight off a global slowdown and fend off deflationary pressures.

If Powell focuses on firming inflation and maintains his reluctance to signal a steady flow of rate cuts and openness to QE down the road, the dollar could surge across the board.  If Powell emphasizes the downside risks to the economy and delivers a dovish cut, we could see the punchbowl argument support US equities to make a run at those recent record highs.  Further accommodation is likely warranted to thwart off the geopolitical risks that include trade wars, tensions in the Persian Gulf, and even Brexit.

Repo Madness
The Federal Reserve Bank of New York was forced to take action on Tuesday after risks grew that rates were about to exceed the Fed’s 2.25% upper end of the central banks’ target range.  The NY Fed bought $53.2 billion of securities in a repo operation.  The sudden surge in the overnight rate on Treasury repurchase agreements meant there was not enough cash to come out of money markets and rates jumped over 8%.  This problem shows there is some weakness in the mechanism for setting rates.  This probably bolsters the case for the Fed to also cut the IOER rate tomorrow.  The Fed is losing control of dictating rates and if we see continue to see a glut in collateral, the Fed may be forced to introduce a new tool that aims to equalize collateral and reserves.   The other way of fixing this problem would be too deliver enough rate cuts to steepen the US yield curve.

Dot Plots
This Fed meeting could be a turning point for the doves to emerge.  The downside risks could warrant some members committing to delivering a few more 25 basis-point cuts, with a majority at least supporting one more cut by year end.  The hawkish members of the committee have voiced their concerns, which could mean they are ready to capitulate in joining the doves.  They could justify a few more rounds of rate cuts to reduce inversion pressures on the yield curve, but once that is in order and the economy is on firming footing, they can return to tightening.

EUR/USD could fall to fresh 2019 lows if Powell disappoints

Many investors are expecting a massive dollar move following the Fed rate decision.  If Powell and company disappoint the rising dovish expectations that market has firmly priced in, we could see euro fall back to the 1.09 lows that were made after the ECB announced their plans for more QE.  A dovish cut that solidifies more rate cuts and possibly QE are down the road could help propel EUR/USD towards 1.1200 handle.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏

Ed Moya

Ed Moya

EUR/USD Rallies on German Business Sentiment

EUR/USD jumped today after the business sentiment for Germany as well as the whole eurozone showed a surprisingly sharp improvement this month. (Event A on the chart.) But market participants question the ability of the currency pair to maintain its upward momentum for long, especially if the Federal Reserve will disappoint markets with its monetary policy announcement tomorrow.

Both industrial production and capacity utilization increased in August. Industrial production rose by 0.6%, exceeding the average forecast of a 0.2% increase. The previous month’s drop got a positive revision from 0.2% to 0.1%. Capacity utilization rose from 77.5% to 77.9%, whereas analysts were expecting it to stay about unchanged. (Event B on the chart.)

Net foreign purchases were at $84.3 billion in July. The value was smaller than $99.1 billion logged in June but bigger than $81.3 billion predicted by analysts. (Event C on the chart.)

If you have any comments on the recent EUR/USD action, please reply using the form below.