Oil Price Fundamental Daily Forecast – Overdue for Short-Term Correction into Value Area, but Well-Supported

U.S. West Texas Intermediate and Brent crude oil futures are edging lower shortly after the New York opening, but still holding on to its weekly gains. Today’s price action suggests profit-taking is taking place ahead of the weekend or traders are concerned over valuations. Demand for riskier assets and commodities is also pressuring prices amid renewed concerns over the financial stability of China Evergrande.

At 13:29 GMT, December WTI crude oil is trading $72.53, down $0.42 or -0.58% and December Brent crude oil is at $76.14, down $0.32 or -0.42%.

Earlier in the session, oil prices jumped to a two-month high before retreating. None-the-less, the markets are headed for a third straight week of gains, supported by global output disruptions and inventory draws.

Despite today’s minor setback, oil prices are likely to remain supported for months due to disruptions in U.S. Gulf Coast production following Hurricane Ida and other storms.

US Oil Refiners Pick Iraqi, Canadian Crudes to Replace Storm Losses – Traders

U.S. oil refiners hunting to replace lost after a storm hit the U.S. Gulf of Mexico last month have been turning to Iraqi and Canadian oil, while Asian buyers have been pursuing Middle Eastern and Russian grades, analysts and traders said.

Royal Dutch Shell, the largest producer in the U.S. Gulf of Mexico, this week said damage from Hurricane Ida to an offshore transfer facility will limit Mars sour crude supplies into early next year. The grade is used heavily by U.S. Gulf refiners and companies in South Korea and China, the top two export destinations for Mars, Reuters reported.

The United States generally exports more than 3 million barrels per day (bpd) of oil, most from the U.S. Gulf Coast. With overall fuel demand rebounding to pre-pandemic levels, refiners will need to make up for the Mars shut-ins.

The loss of up to 250,000 bpd has some U.S. refiners seeking replacements for fourth-quarter delivery, especially Iraq’s Basra crude, traders said. Others received supplies of sour crude from U.S. storehouses.

Daily Outlook

Friday’s price action suggests the market is a little tired and ripe for a near-term setback. The move is not likely to trigger a major change in trend, but could lead to a break into a value area.

After a near-term pullback, we expect prices to rebound into new highs for the year on the back of inventory drawdowns, lower OPEC production and stronger demand in the Middle East.

For a look at all of today’s economic events, check out our economic calendar.

Price of Gold Fundamental Daily Forecast – Renewed Evergrande Uncertainty Fueling Two-Sided Response

Gold is trading higher but in a tight range on Friday after a drop in Treasury yields drove investors into the non-yielding asset. Gains are likely being capped by a stronger U.S. Dollar. The catalysts behind Friday’s price action are renewed concerns over the fate of China’s Evergrande debt payments.

At 11:43 GMT, December Comex gold is trading $1752.50, up $2.70 or +0.15%.

Today’s price action suggests traders may have moved on from yesterday’s weakness that was fueled by Wednesday’s hawkish comments from the Fed regarding the timing of its tapering plans and its first rate hike.

It’s hard to tell at the moment if gold traders are turning into buyers because of the warning from China to local authorities over a possible collapse of Evergrande or sellers because of the prospects of rate hikes from several central banks.

Gold is trading nearly flat this week despite heightened volatility. This suggests traders aren’t sure about how to play the uncertainty over Evergrande, which has been driving investors into the safety of the U.S. Dollar and other themes ranging from the Fed’s tapering and rate hike expectations.

Ultimately, it all comes down to the direction of interest rates and to some extent the U.S. Dollar. When they aren’t moving in the same direction, gold traders have a hard time figuring out which direction they want to lean on. This tends to lead to low volume, which tightens up the trading range.

Evergrande Stays Silent on its $83 Million Dollar Bond Interest Payment, Leaving Investors in Limbo

Clearly, the Evergrande debt problem is not going to go away anytime soon and is likely to remain a concern headed into the weekend. This could be the source of volatility throughout today’s session especially into the close.

Chinese property developer Evergrande has not said whether it will fulfil its interest payments on its U.S.-dollar bond- a key milestone investors have been keeping their eyes on.

The interest payment due Thursday amounted to $83 million. It was for a $2 billion dollar-denominated bond that’s due to mature in March 2022. Dollar bonds are typically held by foreign investors.

As of Friday morning during Asia hours, the company had not made any announcement, or any filing to the Hong Kong exchange, leaving investors in limbo.

Evergrande has warned it may default on its debt. Investors are watching the developments closely, amid fears of contagion that could spread to other markets.

Chinese authorities have reportedly told local officials to prepare for Evergrande’s potential demise, according to The Wall Street Journal.

Gold traders should get ready to do the volatility dance with Evergrande debt payments due each month in October, November and December.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Mid-Session Technical Analysis for September 24, 2021

The Euro is hovering slightly below a one-week high on Friday as investors moved back into the U.S. Dollar amid renewed concerns over the finances of property developer China Evergrande Group.

Today’s move follows a strong rebound rally by the common currency on Thursday that was fueled as the safe-haven dollar fell after Beijing injected new cash into the financial system, when Evergrande announced it would make interest payments on an onshore bond.

However, investors initiated a new round of safe-haven buying after some holders of its offshore bonds said they had not received coupon payments by a Thursday deadline. Traders also expressed concerns over additional dollar bond interest payments due next week.

At 11:09 GMT, the EUR/USD is trading 1.1734, down 0.0006 or -0.05%.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.1755 will change the main trend to up. A move through 1.1683 will signal a resumption of the downtrend.

The minor range is 1.1755 to 1.1683. The EUR/USD is currently holding slightly above it pivot at 1.1719, making it new support.

The short-term range is 1.1664 to 1.1909. Its retracement zone at 1.1758 to 1.1787 is potential resistance.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the EUR/USD on Friday is likely to be determined by trader reaction to the pivot at 1.1719.

Bullish Scenario

A sustained move over 1.1719 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into 1.1755 – 1.1758. Overtaking this area could extend the rally into 1.1787.

Bearish Scenario

A sustained move under 1.1719 will signal the presence of sellers. This could trigger an acceleration to the downside with 1.1683 a potential target, followed by the August 20 main bottom at 1.1664.

For a look at all of today’s economic events, check out our economic calendar.

Gold Price Futures (GC) Technical Analysis – Strengthens Over $1757.40, Weakens Under $1738.60

Gold futures are edging higher early Friday on short-covering ahead of the weekend, one-day after the market posted a more than 1% decline. Despite the early strength, the market is still poised to finish lower for the week.

Safe-haven buyers who took positions earlier in the week on concerns over China Evergrande’s debt woes dumped gold as worries over the company’s imminent default eased.

At 06:16 GMT, December Comex gold settled at $1755.50, up $5.70 or +0.33%.

Today’s early rebound reflects the two-sided action in U.S. Treasury yields and the U.S. Dollar. The direction gold the rest of the session on Friday will be driven primarily by the movement in yields and to a lesser extent by the U.S. Dollar.

I don’t anticipate any major movement to the upside, however, because of the hawkish tone by the Federal Reserve earlier in the week.

Daily December Comex Gold

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $1737.50 will signal a resumption of the downtrend. The main trend will change to up on a move through $1788.40.

The short-term range is $1677.90 to $1836.90. The market is currently trading inside its retracement zone at $1757.40 to $1738.60.

On the downside, the major support is a Fibonacci level at $1716.00. On the upside, the major resistance is a pair of 50% levels at $1795.00 to $1800.00.

Daily Swing Chart Technical Forecast

The direction of the December Comex gold futures contract on Friday is likely to be determined by trader reaction to $1757.40.

Bullish Scenario

A sustained move over $1757.40 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for the rally to possibly extend into a main top at $1788.40, and a pair of 50% levels at $1795.00 and $1800.00.

Bearish Scenario

A sustained move under $1757.40 will signal the presence of sellers. This could trigger a break into a support cluster at $1738.60 to $1737.50.

Taking out $1737.50 will indicate the selling pressure is getting stronger. This could trigger a further break into the major Fibonacci level at $1716.00.

For a look at all of today’s economic events, check out our economic calendar.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Strong Over 34655, Weak Under 34431

December E-mini Dow Jones Industrial Average futures are edging lower in the pre-market session on Friday, one day after posting a more than 1% gain. The price action suggests the move was fueled by value-seeking buyers who may have been expressing relief about the Federal Reserve’s stance on tapering stimulus and raising interest rates.

At 05:35 GMT, December E-mini Dow Jones Industrial Average futures are trading 34621, down 23 or -0.07%.

Investors also returned to the market as concerns eased further over a potential default by Chinese property developer Evergrande even as Reuters reported that some holders of the firm’s dollar bonds had given up hope of getting a coupon payment by a key Thursday deadline.

In stock related news, shares of IT services provider Salesforce finished up 7.21% and the company was a big boost to the Dow during the session after it raised its annual earnings forecast.

Daily December E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 33478 will signal a resumption of the downtrend. A move through 35383 will change the main trend to up.

The minor trend is also down. A trade through 34826 will change the minor trend to up. This will shift momentum to the upside.

The main range is 32835 to 35429. Its retracement zone at 34132 to 33826 is a potential support area.

The short-term range is 35383 to 33478. The market is currently testing its retracement zone at 34431 to 34655. Trader reaction to this zone will determined the near-term direction of the E-mini Dow.

Daily Swing Chart Technical Forecast

The direction of the December E-mini Dow Jones Industrial Average on Friday is likely to be determined by trader reaction to 34655.

Bullish Scenario

A sustained move over 34655 will indicate the presence of buyers. Taking out the minor top at 34826 will change the minor trend to up and shift momentum to the upside. This could extend the rally into a pair of minor tops at 34907 and 35076. The latter is the last potential resistance before the main top at 35383 and the record high at 35429.

Bearish Scenario

A sustained move under 34655 will signal the presence of sellers. This could trigger a break into the 50% level at 34431.

We could see a technical bounce on the first test of 34431, but if it fails then we could see a retest of the main retracement zone at 34132 to 33826.

For a look at all of today’s economic events, check out our economic calendar.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Strong Over 15360.50, Weak Under 15254.75

December E-mini NASDAQ-100 Index futures rallied for third day as fears around a crisis in China’s property eased somewhat and as the Federal Reserve kept current monetary stimulus in place for just a little bit longer. Thursday’s gain also pushed the technology-driven index higher for the week.

At 20:18 GMT, December E-mini NASDAQ-100 Index futures are trading 15314.50, up 151.00 or +1.00%.

In stock related news, Marriott International Inc rose 3.82%. Moderna Inc was up 3.15% and Booking Holdings Inc jumped 2.88%.

Daily December E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending lower. A trade through 14699.00 will change the main trend to down. A move through 15702.25 will signal a resumption of the uptrend.

The minor trend is down. This is controlling the momentum. A move through 15532.50 will change the minor trend to up. This will shift momentum to the upside.

The main range is 13450.00 to 15702.25. Its retracement zone at 14576.25 is the major support.

The short-term range is 14437.00 to 15702.25. Its retracement zone at 15069.50 to 14920.25 is additional support. This zone stopped the selling three times this week.

The minor range is 15702.25 to 14807.50. The index is currently trading inside its retracement zone at 15254.75 to 15360.50. Trader reaction to this area will determine the near-term direction.

Daily Swing Chart Technical Forecast

The direction of the December E-mini NASDAQ-100 Index early Friday is likely to be determined by trader reaction to 15254.75 and 15360.50.

Bearish Scenario

A sustained move under 15254.75 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into 15069.50 to 14920.25.

Bullish Scenario

A sustained move over 15360.50 will signal the presence of buyers. If this move creates enough upside momentum then look for a surge into the minor top at 15532.50. Taking out this level could trigger an acceleration to the upside with 15702.25 the next major target.

For a look at all of today’s economic events, check out our economic calendar.

E-mini S&P 500 Index (ES) Futures Technical Analysis – Strengthens Over 4445.75, Weakens Under 4416.50

December E-mini S&P 500 Index futures are trading higher shortly before the cash market close on Thursday. The benchmark index is in a position to post its bets performance in two months as investors shrugged off concerns over the Federal Reserve’s tapering plans.

At 19:17 GMT, December E-mini S&P 500 Index futures are trading 4442.50, up 58.50 or +1.33%.

Easing concerns over a potential default by Chinese property developer Evergrande also fed into market optimism. Investors also shrugged off data showing sluggish business activity growth and a rise in jobless claims, in line with expectations for a slowdown in economic growth in the third quarter.

Daily December E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 4539.50 will change the main trend to up. A move through 4293.75 will signal a resumption of the downtrend.

The minor trend is also down. A trade through 4478.50 will change the minor trend to up. This will shift momentum to the upside.

The main range is 4117.00 to 4539.50. Its retracement zone at 4328.25 to 4278.50 is support. This zone stopped the selling at 4293.75 on Monday.

The short-term range is 4214.50 to 4539.50. Its retracement zone at 4377.00 to 4338.50 is new higher support.

The minor range is 4539.50 to 4293.75. The index is currently testing its retracement zone at 4416.50 to 4445.75. Trader reaction to this zone will determine the near-term direction of the index.

Short-Term Outlook

The direction of the December E-mini S&P 500 Index into the close on Thursday will be determined by trader reaction to the minor Fibonacci level at 4445.75.

Bullish Scenario

A sustained move over 4445.75 will indicate the presence of buyers. The next upside target is the minor top at 4478.50. Taking out this level will change the minor trend to up.

Bearish Scenario

A sustained move under 4445.50 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the 50% level at 4416.50. This is a potential trigger point for an acceleration into the 50% level at 4377.00.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Mid-Session Technical Analysis for September 23, 2021

The Euro is trading higher against the U.S. Dollar on Thursday as improved risk sentiment in global financial markets erased all the gains it notched in the previous session after the U.S. Federal Reserve flagged plans to reel in stimulus this year. A rise in U.S. Treasury yields is helping to cap gains.

AT 04:56 GMT, the EUR/USD is trading 1.1742, up 0.0052 or +0.45%.

In other news, the dollar found little support from data that showed the number of Americans filing new claims for jobless benefits unexpectedly rose last week amid a surge in California.

Additionally, while positive for the dollar, the boost from the Fed’s announcement was undercut by hawkish messages from several central banks in Europe, and as Norway became the first developed nation to raise rates.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.1755 will change the main trend to up. A move through 1.1683 will signal a resumption of the downtrend.

The minor range is 1.1685 to 1.1755. In a sign of strength, the EUR/USD is currently trading on the strong side of its pivot at 1.1719, making it support.

The first short-term range is 1.1664 to 1.1909. Its retracement zone at 1.1758 to 1.1787 is resistance.

The second short-term range is 1.1909 to 1.1683. Its retracement zone at 1.1796 to 1.1823 is additional resistance.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Thursday is being controlled by 1.1690.

Bullish Scenario

A sustained move over 1.1690 will put the EUR/USD in a position to post a potentially bullish closing price reversal bottom. Holding above the pivot at 1.1719 indicates the buying is getting stronger.

Taking out 1.1755 will change the main trend to up. A move through the Fibonacci level at 1.1758 will indicate the buying is getting stronger. This could trigger an acceleration to the upside with the resistance cluster at 1.1787 to 1.1796 the next likely upside target.

Bearish Scenario

The inability to overcome 1.1755 will be the first sign of selling pressure. This could trigger a break into the pivot at 1.1719. Taking out this level will indicate the selling pressure is getting stronger. This could trigger a retest of the intraday low at 1.1683.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Buying Pressure Could Weaken as Market Nears Major Resistance Levels

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Thursday as investors continue to build on the premise of tight supply and increasing demand. The buying is so strong that traders are shrugging off weaker U.S. economic data although a softer U.S. Dollar could be helping to fuel expectations of increased foreign demand.

At 14:45 GMT, December WTI crude oil futures are trading $72.66, up $0.77 or +1.07% and December Brent crude oil is at $76.03, up $0.64 or +0.85%.

Both WTI and Brent crude futures are trading on the bullish side of their July 6 tops, putting them in a position to possibly accelerate to the upside. On July 6, the December WTI futures contract hit a high of $72.61, but the near-term August futures contract was trading $76.98.

The question is, “Is there any reason to chase the $76.98 top?” The market is currently being supported by basically week-old data. Wednesday’s U.S. government report was based on data up to September 17. As the industry continues to recover from Hurricane Ida, supply could rise, but will it be enough to offset increased demand? If it is then we may have seen the bottom in crude oil supply in Wednesday’s report.

US Crude Stockpiles Fall to Lowest in 3 years, Gasoline Builds –EIA

U.S. crude oil inventories last week fell to the lowest in nearly three years while gasoline stockpiles rose, the Energy Information Administration said on Wednesday.

Crude inventories fell by 3.5 million barrels in the week to September 14 to 414 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.4 million-barrel drop. Inventories now sit at their lowest levels since October 2018, and that tightness, along with strong demand, has helped drive oil prices higher.

Weekly figures on refining activity and oil production showed a return to pre-hurricane activity. Crude production jumped 500,000 barrels per day in the week to 10.6 million bpd, as Gulf offshore facilities resumed operations, Reuters reported.

Refinery runs rose by 960,000 bpd in the last week, with utilization rates up 5.4 percentage points to 87.5% of capacity as refiners restarted key units.

Overall product supplied jumped as a result of 21.1 million bpd, and for the past four weeks, product supplied – a proxy for demand – averaged nearly 21 million bpd, roughly in line with pre-pandemic levels.

Undercutting the optimism, U.S. gasoline stocks rose by 3.5 million barrels to 221.6 million barrels, compared with expectations for a 1.1 million-barrel drop.

Distillate stockpiles, which include diesel and heating oil, fell by 2.6 million barrels versus expectations for a 1.2 million-barrel drop.

Net U.S. crude imports rose last week by 519,000 bpd, the EIA said.

Crude stocks at the Cushing, Oklahoma, delivery hub fell by 1.5 million barrels in the last week, the EIA said.

Daily Forecast

Despite Thursday’s rally, the buying looks a little tentative. Prices are at or close to the July top so I believe we’re going to start seeing some profit-taking. The recovery from Hurricane Ida is moving along quickly so I expect to see a rise in production that is faster than demand. This will lead to increased supply over the short-run.

For a look at all of today’s economic events, check out our economic calendar.

Price of Gold Fundamental Daily Forecast – Traders Selling on Rising Yields, Ignoring Weaker US Dollar

Gold futures are sharply lower on Thursday despite a weaker U.S. Dollar. The catalyst behind the move is higher U.S. Treasury yields. If you follow the theory that a weaker dollar is supportive for gold then you’re probably confused by the market’s weakness. But keep in mind that the theory is valid over the long-run and that silly things can happen on a day-to-day basis.

The correlation between Treasury yields and gold is a lot clearer. This is because gold doesn’t pay a dividend to hold it. So when yields rise, investors tend to chase them. The relationship is pretty cut and dry.

The relationship between the U.S. Dollar and gold is clear over the long-run , but over the short-run, it can be quite volatile. It all depends on the fundamentals driving the movement in the greenback.

When the U.S. economy is prospering and interest rates are higher or rising, the dollar is a more attractive asset. A stronger dollar reduces demand for dollar-denominated gold in this case.

When the dollar is supported by safe-haven buying, gold can move in either direction. When investors sell the dollar because the threat driving the safe-haven buying has dampened, gold doesn’t necessarily move higher. This is probably what is going on today.

On Thursday, the Fed said it is prepared to taper, but it doesn’t know when it will begin. This news may be enough to put a lid on gold prices.

When the Fed said that more Federal Open Committee (FOMC) policymakers favor moving up the date of the first interest rate hike from 2023 to 2022 then Treasury yields firmed and gold prices fell.

The easing of tensions over China’s Evergrande is also encouraging investors to dump gold. That’s another story altogether. Hedgers bought gold on Monday when the threat of default by Evergrande drove global stock markets sharply lower. Investors bought gold for protection or a hedge against a further decline.

Now that the threat of default by Evergrande has dissipated and demand for riskier assets has returned to near normal, stock market investors don’t see the need to hedge their positions. So they are liquidating their hedges. At least that’s how I see.

Daily Outlook

Today’s weakness in the dollar and gold is being partially driven by long liquidation due to increased demand for riskier assets. Remember that both went up on Monday when stocks were selling off sharply. Well those buyers are getting out.

Investors are no longer focused on stock market risk. They have shifted their interest to the Fed. The central bank’s comments on Wednesday were hawkish . Higher yields usually follow hawkish comments and when yields go up, gold tends to go down.

Investors are chasing yields or investments that pay them. Gold doesn’t pay you to hold it so it’s not in high demand. Overtime, the normal relationship between the dollar and gold will return, just not today, it appears.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Update – Buying Looks Tentative as Market Approaches Major Resistance Levels

U.S. West Texas Intermediate crude oil futures are trading higher early Thursday, helped by a bigger-than-expected draw in U.S. government crude inventories and signs of growing fuel demand. The price action indicates that the supply/demand situation is the number one concern with traders as most of the major players have chosen to shrug off the strength in the U.S. Dollar.

At 06:32 GMT, December WTI crude oil futures are trading $71.99, up $0.10 or +0.14% and December Brent crude oil futures are at $75.47, up $0.08 or +0.11%.

Crude inventories fell by 3.5 million barrels in the week to September 17 to 414 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.4 million-barrel drop.

Undercutting the optimism, U.S. gasoline stocks rose by 3.5 million barrels to 221.6 million barrels, compared with expectations for a 1.1 million-barrel drop. Distillate stockpiles, which include diesel and heating oil, fell by 2.6 million barrels versus expectations for a 1.2 million-barrel drop.

Daily December WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $72.39 will signal a resumption of the uptrend. A move through $69.05 will change the main trend to down.

The minor range is $72.39 to $69.05. Its 50% level at $70.72 is the nearest support.

The short-term range is $67.04 to $72.39. Its retracement zone at $69.72 to $69.08 is the key support area. This zone stopped the selling at $69.05 on September 21.

The main range is $61.11 to $72.39. If the main trend changes to down then look for the selling to possibly extend into its retracement zone at $66.75 to $65.42.

Daily Swing Chart Technical Forecast

The direction of the December WTI crude oil market on Wednesday is likely to be determined by trader reaction to $71.89.

Bullish Scenario

A sustained move over $71.89 will indicate the presence of buyers. Taking out the intraday high at $72.18 will indicate the buying is getting stronger. This could trigger a surge into the September 15 main top at $72.39, followed by the July 6 main top at $72.61.

Trading conditions will get interesting if buyers can clear out the main top at $72.61. This is because the next targets are a series of main tops at $74.77, $76.07 and $76.98.

Bearish Scenario

A sustained move under $71.89 will signal the presence of sellers. The first downside target is the pivot at $70.72. Since the main trend is up, buyers could come in on the first test of this level.

If $70.72 fails as support then look for the selling to possibly extend into the 50% level at $69.72, followed by the support cluster at $69.08 – $69.05.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Fundamental Daily Forecast – Hovering Above Target Zone at $4.867 – $4.649 Ahead of EIA Data

Natural gas futures are inching lower early Thursday well ahead of today’s government storage report that could determine the near-term direction of the market.

The market is also hovering above a key retracement zone at $4.867 to $4.649 for a third session. Trader reaction to a test of this area will tell us if the buyers are still in control, or if the short-sellers have recaptured the momentum unless there is an earlier than expected cold shot or until the winter heating season begins.

At 02:26 GMT, December natural gas futures are trading $4.947, down $0.022 or -0.44%.

The mostly sideways-to-lower price action this week has been primarily fueled by two factors. Helping to keep a lid on prices are forecasts calling for weak short-term demand due to mild weather conditions. Underpinning prices and perhaps preventing a sharp break are rebounding liquefied natural gas (LNG) export volumes.

Bespoke Weather Services added that Thursday’s U.S. Energy Information Administration (EIA) storage report” is the next major data point” that could drive futures in either direction the rest of this week.

LNG Feed Gas Levels Rise ~ NGI

Natural Gas Intelligence (NGI) reported that Freeport LNG in Texas largely resolved production issues after former Hurricane Nickolas knocked out power last week. This helped to drive up LNG feed gas levels to 10 Bcf on Wednesday from around 9 Bcf earlier in the week and not far from record levels reached over the summer amid robust demand from Europe and Asia.

Supplies of gas in Europe are precariously light, galvanizing calls for Lower 48 exports to rebuild stockpiles for winter. Demand from Asia is robust and its natural gas needs appear likely to swell further following a Chinese government announcement this week that it would stop building coal-fired plants abroad.

The announcement did not specify whether the policy shift would impact China’s domestic coal projects, but analysts said it would drive up gas demand in other Asian countries.

Early Look at Thursday’s EIA Weekly Storage Report

A consensus of experts predicts Thursday’s EIA storage report for the week-ending September 17 will show a build between the mid-70s to low 80s Bcf.

NGI reported that a Reuters survey ranged from injections of 58 Bcf to 82 Bcf, with a median build of 76 Bcf. Bespoke predicted a 75 Bcf increase. NGI’s model called for an 82 Bcf injection.

Last year, the EIA recorded a 70 Bcf injection for the similar week, while the five-year average injection is 74 Bcf.

Daily December Natural Gas

Daily Outlook

A bearish EIA report should drive prices into the technical retracement zone at $4.867 to $4.649. Trader reaction to this move will determine the near-term direction of the market.

Ahead of the report, the $4.867 to $4.649 retracement zone represents value. But that’s given the current fundamentals.

Traders betting on strong near-term weather demand as well as increased LNG exports will probably buy the break into this area. Those traders betting on lower demand until the start of the winter heating season will likely drive prices through the support at $4.649, in search of better value.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Forex Technical Analysis – Weakens Under 1.1690, Strengthens Over 1.1719

The Euro is inching higher early Thursday after plunging the previous session as traders interpreted the Federal Reserve’s monetary policy statement and comments from Fed chief Jerome Powell as hawkish. The news also pushed Treasury yields higher which made the U.S. Dollar more attractive than a basket of major currencies.

At 01:54 GMT, the EUR/USD is trading 1.1694, up 0.0004 or +0.04%.

On Wednesday afternoon, the Fed held benchmark interest rates near zero as widely expected, but also indicated that rate hikes could be coming sooner than expected, and it significantly cut its economic outlook for this year.

Helping to drive the Euro lower were two factors. Firstly, Fed Chairman Jerome Powell, at his post-meeting news conference, said the committee is ready to move. This suggests a sense of urgency.

Secondly, more members now see the first rate hike happening in 2022. In June, when members last released their economic projections, a slight majority put that increase into 2023. That puts the Fed on-track to raise rates before the European Central Bank (ECB). Advantage U.S. Dollar.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the main bottom at 1.1664 will reaffirm the downtrend. Taking out 1.1755 will change the main trend to up.

The main range is 1.1664 to 1.1909. The EUR/USD is currently trading on the weak side of its retracement zone at 1.1758 to 1.1787, making it resistance.

The short-term range is 1.1909 to 1.16835. Its retracement zone at 1.1796 to 1.1823 is another potential upside target. This zone will move down as the EUR/USD moves lower.

The new minor range is 1.1755 to 1.16835. Its 50% level or pivot at 1.1719 is the nearest resistance. This level will move lower if traders extend the selling through 1.16835.

Daily Swing Chart Technical Forecast

The early direction of the EUR/USD on Thursday is likely to be determined by trader reaction to 1.1690.

 Bearish Scenario

A sustained move under 1.1690 will indicate the presence of sellers. The first downside target is the intraday low at 1.1683.

Taking out 1.1683 will indicate the selling pressure is getting stronger. This could trigger another acceleration to the downside with the next target the August 20 main bottom at 1.1664.

Bullish Scenario

A sustained move over 1.1690 will signal the presence of buyers. If this move creates enough upside momentum then look for a surge into the minor pivot at 1.1719.

Since the main trend is down, look for new sellers on the first test of 1.1719. Overcoming it could create enough upside momentum to challenge the resistance cluster at 1.1755 – 1.1758.

For a look at all of today’s economic events, check out our economic calendar.

How to Manage Risk in Your Forex Trading Account

Table of Content

Forex Money Management Defined

It is universally accepted that Forex money management is a set of processes that a Forex trader will use to manage the risk in their Forex trading account.

Successful Forex traders tend to accept the adage, “If I’m right on the entry, the upside will take care of itself. If I’m wrong, the downside or losses can be unforgiving.”

The underlying principle of Forex money management, or for that matter, any speculative investment, is to preserve trading capital. This doesn’t mean you won’t have any losing trades because that is impossible. The objective of Forex money management is to minimize trading losses so that they are “manageable”. That means keep your losses small and try to manage a winning trade to get the most profit out of the move.

Essentially a successful Forex trader doesn’t necessarily have more winning trades than losing trades, but rather the dollar amount of his winning traders are consistently bigger than the dollar amount of his losing trades.

The concept of money management is often used interchangeably with the term risk management. However, they are not the same. Risk management is about preparing for and managing all identifiable risks – that can include things as arbitrary as having a backup quote service or charting program. Money management, on the other hand, relates entirely on how to use your capital to grow your trading account balance without putting it in a position to risk it all.

How to Best Avoid Losing Money when Trading Forex Markets

The implementation of a Forex money management plan may be the best way to try to avoid losing money in the Forex market. No trading system is perfect nor are humans, or even robot traders. They all have similar traits (good or bad), but collectively, they do share common mistakes. These common mistakes are the ones that successful traders strive to avoid.

Successful Forex traders tend to think of trading as a business. In that business, there will be profitable trades and overall profitable days, but there will also be losses. Once again, if you want to stay in business then your profits are going to have to be greater than your losses. And once again, we are not saying that you can’t have any losses.

It is important to say at this time that yes, you can lose all your money in any investment where your funds are put at risk. So it is your job as trader/business owner to minimize the chance of that happening.

There are ways to fine tune a trading strategy i.e. optimal entry and/or optimal exit, tighter, well placed stop losses or identifying better profit objectives, with the goal to win more and lose less.

But that is not usually the main reason traders lose money in the Forex markets. The main reason tends to be having no specific money management rules to follow. Here is a list of the rules that top Forex money managers tend to follow.

Top Forex Money Management Rules to Follow

Define Your Risk Per Trade Using a Position-Sizing Model

The idea behind this rule is that a trader should risk only a small percentage of their trading capital on any one trade. Several books or papers on Forex trading preach the ‘2% rule” where a trader should risk 2% of their account on every trade.

This ‘Fixed Percentage Risk’ can actually be any amount you are comfortable with and can afford.

If your trading account has a $50,000 balance then 2% of that amount will be $1000 of risk per trade.

A $1000 risk per trade may be a huge amount to a trader with a balance of $5000 in his account. In this case, 2% risk will be $100 of risk per trade.

The reason you’ll want to risk a fixed percentage is because if the first trade is a loss then the next trade will carry a smaller amount of dollars at risk.

Taking a smaller amount of risk following a loss will allow you to ride out a losing streak longer than an individual who risks the same amount on every trade. This will buy you time and allow you to have a big enough balance to perhaps start a willing streak.

Know Your Maximum Drawdown Level

A drawdown is the difference in account value from the highest the account balance has been over a certain period and the account value after some losing trades. For example, if a trader begins with $5000 in his account and she loses $1000 then she has a 20% drawdown.

The larger the drawdown, the harder it is to become profitable.

Following a 20% drawdown, a trader would have to make 25% in the market just to get back to even. If your trading system has never shown that kind of return over a reasonable time period then your maximum drawdown rule will tell you to stop trading.

At that point, you can reevaluate your trading strategy. You can lower your fixed percentage of risk, but most of all you can relax and breathe again, allowing you to regroup and reload after you have learned from your mistakes.

Assign a Risk/Reward Ratio to Every Trade

The generally accepted rule in the trading industry is that traders should aim to have winning trades that are on average twice as big as losing trades. With this risk:reward ratio, the trader need win only a third of their trades to breakeven.

The mathematics behind this rule says if a trader choses a risk/reward ratio of 1:1, then the trader must win a higher number of trades (at least 6 out of 10) trades to be profitable. If the trader chooses a risk/reward ratio of 3:1, then they need to win fewer trades (1 in every 4 trades) to break even.

It should be noted that this rule works great on paper, but in reality a trader really has little control of the actual risk/reward he will achieve on a trade.

Furthermore, a trader may be able to control is losses through stops (provided there is no slippage), but at the same time, a trader could cut his profits by not allowing a winning trade to end naturally, for example, by hitting a trailing stop.

The best trading strategy tends to cut losses and let profits run. Over the long-run you’ll get the actual risk/reward ratio.

Essentially, a successful trader has larger average wins than average losses. The bigger the average win, the less a trader has to worry about having a high percentage of wins. For example, you can have 90% accuracy, but if you average loss is $50 per trade and your average win is $10 per trade then one average loss will wipe out 5 of your winning trades.

Use a Stop Loss and Set a Profit Objective

Using a stop loss locks in the maximum amount a trader can expect to lose in any one trade, while a profit objective order locks in the maximum amount the trader can profit.

Don’t just use dollar stops. Place a stop in a place where you are wrong on the trade.

Additionally, if your strategy has been tested for fixed profit levels then follow the rules. If your strategy calls for trailing stops to lock in profits then follow that strategy. Try to avoid mixing your exit strategies because it can skew the risk/reward ratio your trading system needs to be profitable over the long-run.

Remember, in order to be successful, you’ll need to have a few big winners to offset a series of small losses.

Only Trade with Risk Capital

Successful trading is only possible when a trader can make unemotional decisions about what to do when a trading opportunity presents itself.

If you are undercapitalized, you will trade scared. If you trade scared then you will cut corners which could be trading without a stop, taking profits too soon, doubling down on a losing trade or putting yourself in a position too big to handle. If you do any of those things then you limit your chances of success.

Only trade with money you can afford to lose.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Traders Facing Major Decision at 15255.00 – 15360.50

December E-mini NASDAQ-100 Index futures rose a little over 1% on Wednesday as investors showed little reaction to the latest directives from the Federal Reserve, including clearing the way for the central bank to reduce its monthly bond purchases soon.

While trading was choppy following the Fed’s latest policy statement and comments by Federal Reserve Chairman Jerome Powell, the tech-heavy NASDAQ finished the session close to where it was before the central bank news.

On Wednesday, December E-mini NASDAQ-100 Index futures settled at 15178.25, up 154.25 or 1.03%.

Technology shares began the day higher as concerns eased over a default by China’s Evergrande. Evergrande’s main unit said it had negotiated a deal with bondholders to settle interest payments on a domestic bond.

The top five biggest gainers were Booking Holdings Inc, which rose 3.46%, NXP Semiconductors NV was up 3.41% and JD.com jumped 3.29%. These were followed by NVIDIA Corp, which rose 3.27%, followed by Netflix Inc, which posted a 3.06% gain.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through 14699 will change the main trend to down. A move through 15702.25 will signal a resumption of the uptrend.

The minor trend is down. This is controlling the momentum. The minor trend will change to up on a trade through 15532.50. This will shift momentum back to the upside. A move through 14807.50 will indicate the selling pressure is getting stronger.

The main range is 13450.00 to 15702.25. Its retracement zone at 14576.00 to 14310.25 is still the primary downside target and value area.

The short-term range is 14437 to 15702.25. Traders are currently trying to build a support base at its retracement zone at 15069.50 to 14920.25.

The minor range is 15702.25 to 14807.50. Its retracement zone at 15255.00 to 15360.50 is the primary upside target. Trader reaction to this zone will determine the near-term direction of the index. Look for counter-trend traders on the first test of this area. They are going to try to form a potentially bearish secondary lower top.

Short-Term Outlook

The direction of the December E-mini NASDAQ-100 Index early Thursday is likely to be determined by trader reaction to 15073.00.

Bullish Scenario

A sustained move over 15073.00 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into 15255.00 to 15360.50. Look for counter-trend sellers on the first test of this area.

Overtaking 15360.50 will indicate the buying is getting stronger. This could trigger a further rally into the minor top at 15532.50.

Bearish Scenario

A sustained move under 15072.75 will signal the presence of sellers. The first downside target is the 50% level at 15069.50. Look for buyers on the first test. If it fails, then look for the selling to possibly extend into the Fibonacci level at 14920.25.

If the selling is strong enough to take out 14920.25, then look for further downside pressure with this week’s low at 14807.50 the first target, followed by the main bottom at 14699.00.

For a look at all of today’s economic events, check out our economic calendar.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Big Challenge for Bulls at 33431 – 34655

December E-mini Dow Jones Industrial Average futures bounced back from recent losses on Wednesday and are now poised to complete their best day in two months as concerns over a default by China’s Evergrande eased.

The blue chip average was also supported by the news that the U.S. House of Representatives passed a bill Tuesday that would temporarily fund the government and suspend the debt limit.

At 20:40 GMT, December E-mini Dow Jones Industrial Average futures are trading 34152, up 354 or +1.05%.

In other news, the Dow held on to its gains late in the session on Wednesday after the U.S. Federal Reserve kept benchmark interest rates anchored near zero. Investors weren’t rattled either when Federal Open Market Committee (FOMC) members indicated they expect to begin reducing monthly asset purchases “soon,” but did not say when.

In his press conference, Federal Reserve Chairman Jerome Powell summarized the days’ events by saying, “While no decisions were made, participants generally viewed that so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate,” he said.

Daily December E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 33478 will signal a resumption of the downtrend. A move through 35383 will change the main trend to up. This is highly unlikely, but there is room for a normal 50% to 61.8% retracement of its recent sell-off.

The main range is 32835 to 35429. The E-mini Dow has been straddling its retracement zone at 34132 to 33826 for three days in an effort to form a support base.

The minor range is also down. A trade through 34826 will change the minor trend to up. This will also shift momentum to the upside.

The short-term range is 35383 to 33478. Its retracement zone at 34431 to 34655 is the primary upside target.

Short-Term Outlook

Our short-term analysis suggests the December E-mini Dow could develop a counter-trend upside bias as long at 34132 to 33826 holds as support. The primarily upside target is 34431 to 34655.

Trader reaction to 34431 to 34655 will be very important in determining the near-term direction of the E-mini Dow.

Since the main trend is down, sellers are going to come in to defend the trend on a test of 34431 to 34655. They are going to try to produce a potentially bearish secondary lower top. If successful, we should see a retest of 34132 to 33826.

If 33826 fails a second time this week then look for a potential acceleration to the downside with 32835 the next target this time.

If buyers can overcome 34655 with conviction then look for a potential acceleration to the upside with possible stops at 34826 and 35076 along the way.

Essentially, trader reaction to 33431 to 34655 will set the tone into at least Friday’s close.

For a look at all of today’s economic events, check out our economic calendar.

E-mini S&P 500 Index (ES) Futures Technical Analysis – Next Major Decision Area is 4416.75 – 4445.75

December E-mini S&P 500 Index futures are trading higher late in the session on Wednesday as investors look to react to the latest policy announcements from the U.S. Federal Reserve.

The initial reaction suggests policymakers haven’t said anything unexpected yet with economic forecasts and a press conference from Fed Chairman Jerome Powell still on the tap.

At 18:52 GMT, December E-mini S&P 500 Index futures are trading 4376.25, up 33.00 or +0.76%.

In economic news, the Federal Reserve kept its benchmark interest rates anchored near zero. Officials also indicated they expect to begin reducing monthly asset purchases “soon,” but did not say when. Additionally, economic projections pointed to slower growth this year but higher inflation than previously projected.

The most important development in my opinion:  More Federal Open Market Committee (FOMC) members now see the first rate hike happening in 2022. In June, when members last released their economic projections, a slight majority put that increase into 2023.

Daily December E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 4293.75 will signal a resumption of the downtrend. The main trend will change to up on a move through 4539.50.

The minor trend is also down. A trade through 4478.50 will change the minor trend to up. This will also shift the momentum to up.

The main range is 4117.00 to 4539.50. Its retracement zone at 4328.25 to 4278.50 is the major support. This zone stopped the selling at 4293.75 on Monday.

The short-term range is 4214.50 to 4539.50. The index is currently trading on the strong side of its retracement zone at 4377.00 to 4338.75, making it additional support.

The minor range is 4539.50 to 4293.75. Its retracement zone at 4416.75 to 4445.75 is the primary upside target.

Short-Term Outlook

The index is clearly trying to form a support base at 4328.25 to 4278.40. There is nothing wrong with that but it’s only half the battle.

It’s alright to try to form a support base, but if a market doesn’t follow-through with a higher-top then it will move sideways. This occurs when investors think a market is over-priced on rallies, but under-valued on dips. The market goes nowhere and prices churn.

We should find out how strong the index is on the next test of 4416.75 to 4445.75.

Since the main trend is down, sellers are likely to come in on a test of this area. They are going to try to form a new secondary lower top. If buyers can overcome 4445.75, however, then enough momentum could be generated to challenge the all-time high at 4539.50.

On the weakside, The daily chart indicates there is plenty of room to the downside under 4278.40 so be prepared for a possible acceleration into 4214.50 or 4117.00 if this level is taken out with heavy selling pressure.

For a look at all of today’s economic events, check out our economic calendar.

Price of Gold Fundamental Daily Forecast – At Risk to Hawkish Rate Hike Surprise by Fed

Traders are also reacting to a rising U.S. Dollar which is reducing foreign demand for the dollar-denominated asset and steady U.S. Treasury yields which are increasing the opportunity cost of holding the non-yielding asset.

At 14:01 GMT, December Comex gold is trading $1773.80, down $4.40 or -0.25%.

Traders Bracing for Outcome of Fed Meeting, Powell’s Remarks

Gold traders are holding prices relatively steady as they braced for the outcome of a two-day U.S. Federal Reserve monetary policy meeting, new economic projections and remarks from Fed Chief Jerome Powell on reducing the central bank’s massive stimulus support that has been in place since the start of the pandemic.

The decision by the Federal Open Market Committee (FOMC) will determine the near-term direction of gold prices with investors already pricing in an increasingly hawkish outcome.

The recent price action suggests investors are pretty sure the Fed will say they discussed how to begin tapering its massive bond purchases before the end of the year. If the Fed is going to be specific about when it will begin the tapering process then look for it to name November as the month.

Gold Prices at Risk

The danger for gold prices could be in the “dot plot” forecasts from Fed members which might show the median timing of the first rate hike has shifted to 2022 from 2023.

Back in June, gold prices plunged over $100 in two days and posted their worst week since March 2020 after the Federal Reserve’s hawkish turn lifted the dollar and dented gold’s investment appeal. Following its June 16 policy meeting, the Fed signaled it would be considering whether to taper its asset purchase program meeting by meeting and brought forward projections for the first post-pandemic interest rate hikes into 2023.

Daily Forecast

Gold traders have probably priced in the start of tapering before the end of the year, but they have not fully-priced the moving forward of the first interest rate hike and any other rate hikes to follow.

Powell has said that slowing down the Fed’s asset purchases should not be seen as a signal about when rate hikes may come. However, hints about tapering and the newest edition of the central bank’s forecasts could change market expectations around interest rates.

Look for gold prices to fall sharply if the Fed’s “dot plots” show policymakers expect interest rates to move higher sooner than previously projected.

Holding the forecast for the first rate hike to 2023 could produce a mildly bullish response from gold investors.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Firm ahead of EIA Report Amid Tightening Supply, Improving Demand

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are nudging higher on Wednesday shortly before the release of a government report that is supposed to show another drop in supply.

Meanwhile, late Tuesday, an industry report showed U.S. crude inventories fell more than expected last week in the wake of two hurricanes, bringing to the forefront signs of tightening supply and improving demand.

At 13:23 GMT, December WTI crude oil is trading $71.35, up $1.21 or +1.73% and December Brent crude oil is at $74.84, up $1.27 or +1.73%.

Additionally, prices were also supported as some OPEC members struggle to raise output and by a general sense of energy market shortages amid a power and gas crisis in Europe, Reuters reported.

American Petroleum Institute Weekly Inventories Report

The American Petroleum Institute (API) late Tuesday reported a draw in crude oil inventories of 6.108 million barrels for the week ending September 17. Analysts were expecting a decline of 2.400 million barrels for the week.

The API also reported a draw in gasoline inventories of 432,000 barrels for the week-ending September 17 – compared to the previous week’s 2.761-barrel draw. Distillate stocks saw a decrease in inventories this week of 2.720 million barrels for the week, compared to last week’s 2.888-million-barrel decrease.

Cushing inventories fell this week by 1.748 million barrels after last week’s 1.345-million barrel decrease.

OPEC+ Struggles to Pump More Oil to Meet Rising Demand

OPEC and its allies struggled again to pump enough oil in August to meet global demand as it recovers from the coronavirus pandemic, potentially adding to upward pressures on oil prices, Reuters reported.

Several OPEC+ members such as Nigeria, Angola and Kazakhstan have struggled in recent months to raise output due to years of under-investment or large maintenance work that has been delayed by the COVID-19 pandemic.

On Tuesday, two OPEC+ sources told Reuters OPEC+ compliance with oil production cuts rose to 116% in August. The figure, which excludes Mexico, compares with 109% in July, and comes as the group boosted production by 400,000 barrels per day in August and September.

Production data for August shows that the main under-producers were African OPEC members Nigeria and Angola and non-OPEC member Kazakhstan.

Daily Outlook

Prices are currently being underpinned by low supply and rising demand. They could rise even further if the U.S. Energy Information Administration’s weekly inventories report shows a bigger than expected draw in crude supplies. Ahead of the report, traders are looking for a 3.3 million barrel drawdown.

Longer-term, the inability of some members of OPEC+ to raise output to agreed levels suggests a supply gap could develop as the group proceeds with a plan for monthly output increases to unwind the rest of record supply cuts made in 2020. This would provide longer-term support for crude prices.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Fundamental Daily Forecast – Hawkish Fed Could Spike Dollar/Yen Higher

The Dollar/Yen is trading higher early Wednesday after surviving an earlier attempt to drive it through a key support area. The Forex pair is being supported by a somewhat hawkish outlook for the Federal Reserve’s monetary policy decisions to be released later in the day, an easing of concerns over an Evergrande default in China and a dovish outlook for the Japanese economy by the Bank of Japan.

At 07:10 GMT, the USD/JPY is trading 109.567, up 0.350 or +0.32%.

Key Technical Area Holding as Support

The main range is formed by the April 23 main bottom at 107.479 and the July 2 main top at 111.659. The USD/JPY is currently trading inside its 50% to 61.8% retracement zone at 109.569 to 109.076.

Earlier in the session buyers came in at 109.122 to stop a price slide. This area has been tested successfully four times since Mid-July.

Overtaking 109.569 will indicate the presence of buyers. A failure to hold 109.076 will indicate the selling pressure is getting stronger.

Federal Reserve Could Surprise Markets with Hawkish Shift

The Federal Reserve is expected to drop more hints on its future policy path, including when to start tapering its bond buying and when to start raising interest rates.

There are also rising expectations the central bank will signal its plans to start reducing its massive bond purchases in November if incoming data holds up.

The so-called “dot plot”, which charts policymakers economic and rates projections, will attract attention for clues on when the Fed will hike its interest rate hikes from the current near zero level.

Investors will interpret a change in the first expected rate hike from 2023 to 2022 as hawkish.

Easing Concerns over Contagion from an Evergrande Default Driving Risk Sentiment

Investors are seeing a shift in sentiment to “risk on” which is pressuring safe-haven demand for the Japanese Yen. Investors are drawing some relief in news embattled Chinese property developer Evergrande would make a coupon payment on its domestic bonds on September 23, calming fears of an imminent default.

BOJ Keeps Policy Steady, Offers Bleaker View on Exports, Output

The Bank of Japan (BOJ) kept monetary policy steady on Wednesday but offered a bleaker view on exports and output, reinforcing expectations the bank will maintain its massive stimulus even as major counterparts eye a withdrawal of crisis-mode support.

Daily Outlook

The price action will be dictated by the movement in U.S. Government bonds. If the Fed moves up the timeline for its first rate hike from 2023 to 2022 then Treasury yields could spike higher. This would widen the spread between U.S. Government bond yields and Japanese Government bond yields, making the U.S. Dollar a more attractive asset.

Gains in the USD/JPY could be capped, however, if risk sentiment turns negative due to renewed fears over an Evergrande default on its interest rate payment scheduled for Thursday.

For a look at all of today’s economic events, check out our economic calendar.