As anticipation builds around Fed impending monetary policy decision today, US 5- and 10-year Treasury yields surged to levels not seen in 16 years. With market expectations firming around a hold in the range of 5.25-5.50% – a forecast that has been in place for over a month – the possibility of any shock moves by the Fed is remote.
Nevertheless, investors will keenly dissect any subtle hints from Fed that might suggest another rate hike this year, or provide clues about the timing and speed of monetary easing in 2024. The forthcoming “dot plot” will be of particular significance.
To recall, in their June meeting, 12 out of 18 policymakers envisioned at least one more rate hike in the calendar year. 10 anticipated interest rates to fall back to 4.50-4.75% by the close of 2024. The evolving position of these dots is bound to sculpt market sentiments for the forthcoming months.
Five-year yield exhibited a strong close overnight, at an unmatched zenith since 2007, recording a 4.521. This surge found an ally in the WTI crude oil, which leaped, touching the 93-mark.
On the technical front, FVX looks ready to resume is long term up trend to finally get rid of resistance zone at around 4.5. The next hurdle is 38.2% projection of 3.205 to 4.495 from 4.165 at 4.657.
Any upside surprises in today’s Fed inflation projections could potentially steer FVX towards the 4.657 projection level. Yet, surpassing this level might necessitate a sustained WTI oil rally, breaking the 95 mark and advancing towards 100.
