US Dollar Price Volatility Report: Powell & SEP to Drive USD

US DOLLAR CURRENCY VOLATILITY COULD SWELL ON POWELL SPEECH, FOMC FORECASTS

  • US Dollar implied volatility drifts higher as the September Fed meeting nears
  • USD price action may respond less to the FOMC rate decision and more to Fed Chair Powell’s commentary and the central bank’s updated economic projections
  • Join DailyFX Chief Currency Strategist John Kicklighter for free live webinar coverage of the Federal Reserve’s latest monetary policy update

US Dollar price action is set to swing with the FOMC interest rate decision officially less than 24-hours away. The Fed will release its most recent stance on monetary policy Wednesday, September 18 at 18:00 GMT with the US central bank teed up to cut rates for the second time this year and Chair Powell’s press conference to follow shortly after.

DXY US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (MARCH 29, 2019 TO SEPTEMBER 17, 2019)

DXY US Dollar Index Price Chart Technical Analysis

Chart created by @RichDvorakFX with TradingView

Greenback strength has curtailed ahead of the September Fed meeting as uncertainty surrounding its next policy move and updated summary of economic projections (SEPs) loom. Nevertheless, the DXY Index remains anchored to its choppy trading range as expected and pointed out in yesterday’s US Dollar price volatility report.

As the Fed rate review unfolds tomorrow, however, it may prove most beneficial to approach US Dollar price action with a “high-level” perspective, which draws attention to the rising wedge pattern etched out since late-April. Other notable technical areas are highlighted by support from the 50-DMA and 200-DMA as well as confluence around the 97.50 level. At the same time, resistance is posed by the 23.6% Fibonacci retracement level of the US Dollar’s bullish leg since June in addition to this month’s swing highs.

FEDERAL RESERVE LARGELY EXPECTED TO DELIVER INTEREST RATE CUT

Fed Rate Cut Expectations September 2019 Chart

In a follow-through of the July Fed meeting, which revealed the central bank’s first interest rate cut in over a decade, the FOMC is overwhelmingly expected to cut rates for a second time this year on Wednesday. In fact, the probability that Fed cuts rates by 25bps is priced in as a certainty according to the most recent overnight swaps data pulled from Bloomberg with an additional 50bps of easing expected over the next 12 months.

FOMC interest rate change expectations September 2019 Fed meeting

Aside from the possibility that the Federal Reserve refuses to match dovish expectations, the Fed dot-plot could spark the most US Dollar volatility as markets react to FOMC participants’ revised estimates for the federal funds rate. Updated SEPs will also include fresh forecasts for US GDP growth, inflation and the unemployment rate, which stand to stir USD price action as well. Additionally, the risk that President Trump takes to his personal twitter account and either flirts the idea of currency intervention or hints at a disruption to recent trade war progress to combat US Dollar strength is worth mentioning.

US DOLLAR IMPLIED VOLATILITY & TRADING RANGES (OVERNIGHT)

USD Price Volatility Chart Implied Trading Ranges for September FOMC rate review

Yet, US Dollar implied volatility appears relatively muted on balance when looking at overnight forex options contracts judging by the 12-month percentile rank readings. This suggests that the Fed may deliver as expected rather than catch markets off-guard and stir volatility in the process. Conversely, a recent string of upbeat data prints on the US economy and overly-aggressive monetary policy easing by other central banks could make justifying another Fed rate cut difficult. Read more on Why the Fed may fail to match Draghi and the case for a hawkish hold by the FOMC.

US DOLLAR SKEW (OVERNIGHT)

US Dollar Price Risk Reversal Chart

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

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

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

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 …






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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.

London Summit 2019 Launches the Latest Era in FX and Fintech – Join Now

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