Hello Traders,
The FOMC Meeting and rate decision is expected to take place this evening from 19:00 GMT, in which the consensus from most analysts forecast a 25 bps rate cut. During the previous meeting on September the 18th we have seen a 50bps rate cut against the 25bps forecast, as the jobs market has been colling down during the past few months. From 5.50% rates went to 5.00% and with tonight’s forecasts could potential see them at 4.75%.
CPI inflation data has managed to cool off down to the 2.4% allowing the US Federal reserve to start the rate cuts and monetary policy easing, as now the main data which determines the size of the rate cuts is the Jobs data.
The question is whether we will see another 50bps rate cut considering just the 12k new jobs added from last week’s Nonfarm payrolls data. Having said that, the unemployment rate remained at the 4.1% level and thus far there is no data that suggests that a significant economic recession is on the way and that should be a fact to consider for the Federal Reserve’s rate decision this evening.
The market before the FOMC – Technical Outlook
US Indices – Bullish Breakout
Russell 2000 – Small Caps broke August highs attempting to break 2021 peak
The Russell 2000 breaking above August highs signifies an optimism in the overall market dynamic post US elections as well as the optimism for further rate cuts. The Index has been struggling to trade higher in comparison to large cap stock Indices like the Dow Jones, SP500 or the Nasdaq. Now it appears that after a bullish leading diagonal breakout generates a trend based Fibonacci extension target area of $2945.20 – $2687.70 near term and with any rate cuts and further hints from Fed’s chairman Jerome Powell of more upcoming monetary easing policy, the Index can continue to extend higher.
US DOLLAR INDEX – Retesting Summer Highs & Major Trendline from 2023 From 27.09.2024
As the USDX rebalanced after the summer’s drop and panic about an upcoming major recession as the unemployment rate remained balanced and NFP figures in September were decent now it is faced with a trendline potential resistance and potential exhaustion from 27.09.2024 rally. Rate cuts typically provide weakness in the currency, especially if the rate cut would be bigger than the expectations.
Traders should be paying attention to this evening’s decision as well as the press conference for any clues or hints as to what the Federal reserve is also looking to do in the near future as this would imply the next trajectory of the market and the impact ion the US Dollar, Indices & stock market.
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