Before the Federal Reserve made its decision, the US dollar was close to its lowest level since March 2022, and it is expected that Fed policymakers will resume cutting interest rates to support the weak labor market.
The US dollar index fell for the third consecutive day, down 0.1%. Traders are awaiting the central bank’s statement and further guidance on the pace of interest rate cuts for the remainder of the year. The euro and the yen drove major currencies higher against the US dollar.
The Federal Reserve began a two-day meeting on Tuesday amid signs of weakness in the job market and mounting pressure from US President Donald Trump to cut interest rates. The dovish speech delivered by Federal Reserve Chair Jerome Powell at the Jackson Hole symposium last month helped boost expectations of interest rate cuts.
The market seems to be digesting expectations of further interest rate cuts by the Federal Reserve every day. By the end of the year, a 75 basis point interest rate cut is the new benchmark scenario.
Employment growth in the United States cooled significantly in August, with the unemployment rate rising to its highest level since 2021, raising concerns that the labor market may be on the verge of a more severe deterioration. Furthermore, data released last week indicated that in the year ending in March, job growth in the United States was far below the previously reported strong level.
Swap traders have fully factored in the possibility of the Federal Reserve cutting interest rates by 25 basis points later today, and the possibility of a 0.5 basis point cut is extremely slim. Even though the retail sales data released on Tuesday was stronger than expected, it failed to dispel these bets – although it did suggest that the interest rate cut was unlikely to exceed 25 basis points. Market participants will also keep an eye on the central bank’s dot plot, which shows how much monetary policy policymakers expect to further ease in the coming months.
According to currency traders familiar with the trading situation, hedge funds increased options trading on Tuesday, betting that the US dollar will weaken further against a series of currencies including the euro, the Japanese yen and the Australian dollar in the coming months. As they were not authorized to speak publicly, these traders requested anonymity.
The euro rose to a four-year high on Tuesday as the European Central Bank is not expected to cut interest rates further, and the gap between its benchmark interest rate and that of the Federal Reserve is narrowing. Meanwhile, the exchange rate of the Swiss franc against the US dollar rose to its highest level since 2015.
Technical analysis
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Gold: Yesterday, the blue area “buy stop” reminded by our plugin achieved a profit and loss ratio of nearly 4 times. The Federal Reserve meeting is about to be announced today. We retain the operation of buying long positions after a low liquidity scan around 3650/60. At the same time, pay attention to the signal of further upward momentum if the price stabilizes above 3,700. For detailed locations, please consult the plugin.
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Nasdaq: Prices are about to receive guidance from the Federal Reserve meeting, and it is expected that the range of volatility may expand. We maintain the strategy of buying a rebound signal after a low sweep around 24100/24000. At the same time, pay attention to whether the price can regain its stability at 24,300/24,350 after the interest rate cut, and then continue to capture the signal of a momentum breakthrough. For detailed locations, please consult the plugin.
(Nasdaq 15-minute chart
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Crude oil: Yesterday, the operation of “buy upon breakthrough” reminded by our blue plugin can perfectly achieve a profit-loss ratio of more than five times. Today, we suggest observing the signal of a rebound after the price correction and sweeping below 64. And a new bullish signal after the momentum has been restored and stabilized at 64.50. For detailed locations, please consult the plugin.
(Crude oil 15-minute chart
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Key financial data and events to focus on today:
14:00 UK Consumer Price Index for August
The final reading of the Eurozone consumer price index for August is at 17:00
The Bank of Canada will announce its interest rate decision at 21:45
02:00 The benchmark federal funds rate of the United States
At 02:30, Chair Powell of the US Federal Reserve held a press conference on monetary policy
