FOMC’s upcoming decision on interest rates is shaping up to be one of the most anticipated in years, with markets still uncertain whether Fed will opt for a 25bps cut or go bolder with a 50bps reduction. As of now, futures markets are pricing in a 65% chance of a 50bps cut, while the remaining 35% lean toward the more traditional 25bps move. Despite this, many economists believe Fed will take a more measured approach, but the decision is likely to reveal a split within the FOMC, with intense debates expected between the hawks and doves on the committee.
Beyond the size of the rate cut, this meeting will offer much more insight into Fed’s thinking. Alongside the decision, markets are eagerly awaiting updates on future rate cut projections, revisions to the closely watched “dot plot,” and new economic forecasts. And together they will create a complex picture for traders to digest.
As for the broader markets, Dollar may likely follow overall risk sentiment, while the Japanese Yen will likely move in response to US Treasury yields.
The stock market is holding its breath after S&P 500 briefly touched a new intraday record before closing with only a slight gain of 0.03%. Technically, decisive break of 5669.67 will confirm up trend resumption. Next target for the rest of the year will be 61.8% projection 4103.78 to 5669.67 from 5119.26 at 6086.98. In case of a pullback, outlook will still be cautiously bullish as long as 5402.62 support holds.
In the bond market, 10-year yield’s down trend from 4.997 is still in progress for 100% projection of 4.997 to 3.785 from 4.737 at 3.525. Some support could be seen there to bring rebound, but outlook will stay bearish as long as 3.923 resistance holds. Decisive break of 3.525 will pave the way to next long term support level at 3.253.
Turning to currency markets, USD/JPY is now sitting close to a key long term fibonacci support, 38.2% retracement of 102.58 (2021 low) to 161.94 at 139.26. Break of 143.03 minor resistance should confirm short term bottoming, and bring stronger rebound back to 55 D EMA (now at 147.71).
However, decisive break 139.26 will suggest that deeper medium term correction is underway. Next near term target is 61.8% projection of 161.94 to 141.67 from 149.35 at 136.82. Next medium term target is 61.8% retracement at 125.25.
