Pre-Market: Dollar Rallies with Stocks Stable Before the FED

All eyes are now on the Federal Reserve and especially the central bank’s monetary statement, with all signs pointing to a rate hike at tomorrow’s meeting. Trading volumes are relatively low, especially given yesterday’s sizeable drop in all of the major indices.

S&P 500, 4-Hour Chart Analysis

Volatility as measured by the VIX, jumped to 20, the highest in two weeks, as the Nasdaq led the market lower, as we expected, but today the key benchmarks are hovering near unchanged after the opening bell.

EuroStoxx 50, 4-Hour Chart Analysis

Although the Euro’s dip today is helping equities in Europe somewhat, the pronounced long-term weakness in Asian and European markets still persists, and the deterioration among the leaders of the rally, like the Nasdaq, is another sign that the correction will continue.

Tomorrow’s decision could cause violent moves, especially in the case of a surprising hold by the central bank, whereas a hawkish statement would likely accelerate the decline in stocks. As always, daytraders should be aware of choppy, hard-to-trade conditions before the rate decision across asset classes.

Dollar Up Across the Board as Yen Correction Continues

AUD/USD, 4-Hour Chart Analysis

Forex markets continue to be active with a clear focus on the USD, as yesterday’s bounce quickly faded in the risk-on complex, with the Australian Dollar already hitting a new low against the Greenback, and the Canadian Dollar also losing ground, despite the strength in crude oil. That said, as the said currencies are in oversold territory, the “easy” part of the trade is likely over and a choppy consolidation period around the lows could be ahead.

The worse than expected economic news coming out in Europe helped the USD today compared to the Euro and the Pound, as the British consumer and producer price indices, and the German ZEW sentiment index all pointed to cooling growth in the leading economies.

US 2-year Treasury Yield, 4-Hour Chart Analysis

US Treasury yields are also on the rise today with the 2-Year yield hitting yet another new high, as we speculated last week, also booting the reserve currency.

For bulls, the weakness in the Yen and gold could be an encouraging sign, as the main safe-haven assets are not confirming the selloff in equities this week, but forex markets could look different in a day, as the FED will likely stir things up substantially.

Elsewhere in commodities, crude oi, and the energy segment is up substantially on the yet another looming Nor’-Eastern storm in the US, and continued geopolitical tensions Syria, while industrial metals and precious metals are widely lower amid the Dollar rally.

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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.