(11/09/18) FOMC: Hawkish. USD Strong, Weak EUR. Yen Low. AUD Down. CAD Smok

The Federal Reserve left interest rates unchanged Thursday, however, the committee signaled it will continue to raise at a gradual pace; there is more than a 70% probability that they move in December, writes Bill Baruch, president and founder of Blue Line Futures Thursday.

Bill Baruch’s Midday Market Minute short video for Nov. 9 here.
Where's the bottom for crude?

Fundamentals

Ultimately, the nuts and bolts of the policy statement were untouched, and they said, “risks to the economic outlook appear roughly balanced.”

Markets are digesting the statement as hawkish and the reaction comes down to the committee ignoring the recent volatility, dissipating growth, slowing inflation trajectory, gridlock in Washington, poor housing data, a continued international trade standoff.

Furthermore, they upped their emphasis that the unemployment rate is declining and household spending is growing. One thing the market seemed to ignore was that “business fixed investment has moderated.” These are semantics but given that the dollar’s elevation since early Wednesday morning, the path of least resistance was higher.

The euro finished below 1.14 due to dollar strength and an ongoing standoff between the EU and Italy.

In its Economic Forecasts released Thursday morning, the EU pointed to GDP slowing from 2.1% this year to 1.9% in 2019 and 1.7% in 2020. They warned of downside risks tied to the U.S. raising interest rates and the international trade conflict. This had kept the tape vulnerable through the session. Technically, the euro is eyeing a key support level pointed to in the technical section below before facing a retest to our rare major four-star level.

Friday morning, GDP data from the U.K. is due at 4:30 am EDT along with Manufacturing and Industrial Production. There is nothing on the docket from the Eurozone to close out the week.

From the U.S. PPI is out at 8:30 am EDT and Michigan Consumer Sentiment data for November, the freshest data point released all month, is out at 10:00 am EDT.

The trend in the Japanese yen remains lower in an unenthusiastic manner; it lost half a penny on the session.

U.S. equity markets were stable (SPX). However, given that the Emerging Market Index lost 3%, one would have expected better safe-haven demand.

Gold, Treasuries and yen all finished near session lows due to dollar strength.

The Aussie settled down 36 ticks with major three-star resistance (in the technical section below) keeping a ceiling on the price action. The Shanghai Composite finished on its low and the Emerging Markets Index got hammered as the U.S. dollar stabilized. This comes despite uplifting Trade Balance data from China last night. Tonight, Home Loans data and the Minutes from the latest RBA meeting are out at 7:30 pm EDT. Chinese CPI and PPI are due at 8:30 pm EDT.

The Canadian dollar got smoked late in the session on the one – two punch of dollar strength and reports that Canada is unhappy with changes to the new NAFTA deal. Overall, the currency has been hanging by threads as Crude Oil has lost ground for nine straight sessions and this took any last bits of wind out of the sails. Technically, traders must focus on major three-star support in the technical section below.