US open: Wall Street set to extend losses after the Fed's hawkish shift
Fiona Cincotta June 17, 2021 1:51 PM
Stocks are sent to open lower and the USD builds on gains after the Fed surprised the market with a hawkish shift. Jobless claims rose for the first time since April.
Dow futures -0.34% at 339213
S&P futures -0.4% at 4207
Nasdaq futures -0.5% at 13913
FTSE -0.7% at 7140
Dax -0.05% at 15700
Euro Stoxx -0.17% at 4149
Mixed data shrugged off, all eyes on the Fed
US stocks fells in the previous session and look set to extend those losses today after the Fed took a sudden hawkish turn.
The Fed upwardly revised growth and inflation forecasts as it expects the US economy to recovery at a faster rate. In addition to starting a discussion over when to start tapering asset purchases, the Fed also, indicated that it might hike rates twice in 2023, sooner than the initial 2024 kick off. If that wasn’t enough 7 policy makers (of 17) even pointed to a 2022 start to hiking rates.
The announcement stunned the market sending bond yields shooting higher, the US Dollar to a two month high and equities lower.
Jobless claims unexpectedly rise
Jobless claims came in weaker than expected. Initial claims unexpectedly rose to 412k last week, up from 375k the week before and well above the 359k forecast. This was the first rise in claims since April. The data comes after two months of weaker than forecast non farm payroll numbers. Whilst the week jobless claims data hasn’t caused a reaction in the market, one weak print by no means constitutes a new trend. However, too many more weeks of weakness could start to unnerve investors.
Where next for the Dow Jones?
The Dow Jones was the hardest hit by the Fed’s shift. The selloff in the Dow is an extension of the weakness that we saw earlier in the week and has taken the index below its ascending trendline dating back to March 2020, for the first time. The index found support at 38000 and is attempting to crawl higher, although the MACD is supportive of further declines.
Any meaningful recovery would need to retake the ascending trendline at 34000, round number. Beyond here resistance can be seen at 34200 the low June 14 & 15. It would take a move above the 200 sma on the 4 hour chart at 34350 to negate the current downtrend. Failure to retake the trendline could see sellers target 33800 yesterday’s low ahead of 33650 and 33290 the May low.
FX – USD hits 2 month high, EUR slumps on divergent central banks
The US Dollar has surged higher following the Fed meeting. The prospect of tighter monetary policy sent the greenback to a two month high.
EUR/USD is underperforming its major peers. The Fed’s hawkish turn contrasts deeply with the ECB’S dovish stance in its meeting last week. The Euro didn’t even find solace in stronger than forecast core inflation data. Core CPI rose 1% YoY in May, ahead of the 0.9% forecast. CPI hit 2% YoY, in line with estimates and hitting the ECB’s target level.
GBP/USD -0.2% at 1.3955
EUR/USD -0.5% at 1.1936
Oil slips but uptrend remains
Oil have picked up off session lows and are attempting to head back onto positive ground. Oil prices had slipped lower overnight, weighed down by the weaker US Dollar after the Fed’s surprise hawkish turn. The move lower has barely touched the sides of oil’s recent rally amid rising demand expectations.
Losses were also capped by a bigger than forecast draw on crude stockpiles. According to the EIA report crude oil inventories declined by 7.4 million barrels.
Despite the slight pull back the upward trend in oil remains intact.
US crude trades +0.01% at $91.90
Brent trades -0.1% at $73.71
04:00 BoJ Interest Rate Decision
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.