Dow Jones Forecast: DJIA cautious ahead of the Fed rate decision

US futures        

Dow futures -0.12% S&P 500 futures 0.29%  & Nasdaq futures  0.68%

European futures

FTSE 0.56%,  DAX  0.32%

• US stocks mixed ahead of pivotal FOMC meeting
• 10-year Treasury yields ease as oil prices slip
• Will the Fed signal towards another hike this year?
• Oil eases as Saudi Arabia offers more oil easing supply fears

A Fed hike is 92% priced in, will there be two hikes this year?

U.S. Stocks have opened mixed, following a two-day slide, as lower oil prices have brought some relief ahead of the Federal Reserve's interest rate decision later today.

The Fed will announce its decision at 2 pm ET, at a time when elevated Treasury yields, inflation and the ongoing hostilities in the Middle East are keeping risk appetite limited.

Expectations are for the Fed to hike interest rates by 25 basis points to 3.75%–4%, a move that is almost 93% priced in. As a result, the focus will be on whether policymakers validate expectations of a second rate hike this year.

Federal Reserve Chair Kevin Warsh, who was picked by President Trump on the expectation he would cut interest rates, could raise credibility concerns if he doesn't hike rates.

The main focus will be on Warsh's comments, the dot plot and updated growth and inflation forecasts. Given Warsh's preference for limited forward guidance, it could be the dot plot and the forecasts which provide more of a clue to the market.

The markets will want to sense that the Fed is getting inflation under control. Otherwise, Treasury yields could continue rising, which would be damaging for equity demand.

Corporate Movers

SK Hynix and Intel are rising after reports that SK Hynix was in talks with Intel to manufacture memory chips for the U.S. for the first time. Both stocks were up over 2.5%, although SK Hynix said no decision had been made.

Expedia, the online travel company, fell more than 2.5% after Morgan Stanley downgraded the stock to overweight.

Energy stocks are falling after U.S. oil prices eased back. Exxon and Devon Energy are both down around 1%.

The Dow Jones Forecast – Technical Analysis

The Dow Jones ran into resistance at a record high of 54,745 before falling lower, trading in a descending channel and breaking below the 50 EMA to find support at the 100 EMA at 51,900.

Sellers, supported by the RSI below 50, will look to break below the 52,000 support zone and the 100 EMA to open the door to 51,500, the July low.

A break below here exposes the 200 EMA at 50,325.

Any recovery must first rise above the 50 EMA at 52,700. A rise above here opens the door towards 53,800, the September high. Above here creates a higher high, turning attention back up to 54,750 and fresh record levels.

FX Markets – Dollar Rises, EUR/USD Falls

The USD is rising, trading at a two-week high after stronger-than-expected retail sales data and ahead of the FOMC rate decision. Any hawkish commentary could help lift the dollar further. However, any sense that this is a one-and-done could see the USD fall.

EUR/USD is falling amid a stronger U.S. dollar ahead of the FOMC rate decision. Last week, the ECB hiked rates by 25 basis points and upwardly revised growth and inflation forecasts, giving a hawkish bias to the meeting.

GBP/USD is under pressure, trading at 1.3450 after data today showed that UK inflation rose to 3.1% year on year in August, up from 2.9% in July. This comes as prices at the pumps are at their highest level since 2022.

However, service sector inflation was unchanged at 3.4%, and core inflation was unchanged at 2.4%, suggesting that domestic and underlying price pressures are not yet accelerating.

Oil slips as Saudi Arabia offers more oil cool supply fears

Oil prices are falling on Wednesday on reports that Saudi Arabia is offering additional crude cargoes through Oman, easing some concerns over the scale of Middle East supply disruptions.

In the previous session, oil had jumped over $3 higher on fears that crude loading at Saudi Arabia's Red Sea export terminals had been suspended and Riyadh had cancelled some cargo deliveries, escalating concerns that disruptions had reached a critical export route.