Forex Markets Remain Volatile as Fed Meeting Looms

It has been another very hectic day with regards to the traditional financial markets, as currency and bond markets have been very active once again. We expected volatile conditions to persist, as next week’s crucial Federal Reserve meeting is drawing closer, driving rampant speculation in the most affected assets.

Dollar Index, 4-Hour Chart Analysis

The Italy-related fears continue to make headlines too, putting the EUR/USD pair in the epicenter of market action. The Dollar has been week for most of the day, hitting a 2-week low, as the correction in the reserve currency continued, despite the tick higher in Italian yields, as some officials of the European Central Bank hinted at the end of the bank’s quantitative easing program, which would be a surprising move given the strains of the Eurozone’s financial system.

US, 2-Year Treasury Yield

In the US, Treasury yields are higher across the curve, with the 2year yield hovering close to its multi-year high from May, as rate hike odds have been rising again in recent days.  We also expect the central bank to continue with its tightening this month, but a more cautious monetary wouldn’t surprise us, and that would likely cause further correction in the Dollar. Until next Wednesday, we expect wild swings to continue in both directions without a clear trend.

S&P 500, 4-Hour Chart Analysis

The major stock indices are slightly higher after a volatile session, with the Nasdaq losing some of its relative strength near its all-time high, and the large-cap Dow outperforming its peers. The S&P 500 is quietly drifting higher in the meantime, although its still below both the January and March highs. European markets sold off into the close, but the US session saved the day, and according to the futures market they are trading at their session highs.

Gold Still Stuck at $1300 as Bounces Off  Lows

Commodities also had a volatile day with especially oil experiencing heavy trading, thanks to the release of the US inventory data. The release was very bearish for crude, showing a huge inventory build, and although initially, the commodity sold off, it recovered well in late trading, and technicals still point to a correction in the coming period.

Gold Futures, 4-Hour Chart Analysis

Gold fell back below the $1300 level again, thanks to risk-on sentiment, but for now, the technical setup is unchanged, neutral on the short run while being positive from a long-term perspective.

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Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.