Source: PaxForex Premium Analytics Portal, Fundamental Insight
The US ADP Employment Change for October is predicted at 195K. Forex traders can compare this to the US ADP Employment Change for September, reported at 208K.
US Crude Oil Inventories for the week ending October 28th are predicted at 0.367M. Traders can compare this to US Crude Oil Inventories for the week ending October 21st, reported at 2.588M. US Gasoline Inventories for the week ending October 28th are predicted at -1.358M, and US Distillate Stocks at -0.560M. Traders can compare this to US Gasoline Inventories for the week ending October 21st, reported at -1.478M, and to US Distillate Stocks at 0.170M.
The US Federal Reserve will announce its latest interest rate decision today. Markets expect a 75 basis point interest rate increase from 3.25% to 4.00%, marking the fourth consecutive 75 basis point hike and the sixth consecutive move to combat inflation they have caused. While markets have priced in today’s increase in borrowing costs, traders should wait for the press conference 30 minutes after the FOMC announcements. Expectations call for language suggesting a decrease in the rate hike cycle to 50 basis points, followed by two 25 basis points hikes, which would take interest rates to 5.00%.
Consensus has the 5.00% as the terminal rate, and the US Federal Reserve may hold it there until 2024, but some call for interest rates to rise further, with an outlier call for 8.00%. While the US Fed may not hike to 8.00%, market participants must also consider the effects of quantitative tightening, which acts as a quasi-interest rate hike. The US central bank may consider the combination to arrive at an actual interest rate of 8.00%, which could yield a terminal interest rate between 5.50% and 6.50%. Irrelevant to today’s announcement, the bear market gains strength and could close the current bull trap soon, as a perfect storm brews on the horizon, with the most significant issues ahead in 2023 and not behind us.
The forecast for the SP500 remains bearish after this equity index nears the completion of its bear market rally as its horizontal resistance area rejected a further advance. Adding to the bearish outlook is the Ichimoku Kinko Hyo Cloud, which maintains its downtrend with a descending Senkou Span A, maintaining the longer-term bearish outlook. The Tenkan-sen flat-lined and volatility could increase over the next trading sessions. Traders should also monitor the CCI following its breakdown from extreme overbought territory, as it has plenty of downside potential. Can bears withstand bullish attempts and close the bull trap in the SP500, leading it into its next leg lower? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the SP500 Index remain inside the or breakdown below the 3,805 to 3,905 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 3.865
- Take Profit Zone: 3.330 – 3.400
- Stop Loss Level: 4.030
Should price action for the SP500 Index breakout above 3,905, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 4.030
- Take Profit Zone: 4.165 – 4.220
- Stop Loss Level: 3.905
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