This week is opening up to what looks to be a considerable amount of excitement on the horizon, at least for global markets. The economic calendar is loaded with Central Bank announcements this week, including a Fed meeting that’s expected to bring only the third rate hike out of the United States in the past 10 years; but we’re also seeing quite a bit of movement on the political-front as Theresa May might finally gain the ability to trigger Article 50 as early as Tuesday, with Dutch elections taking place the following day on Wednesday. And even outside of those drivers – markets are putting in some fairly interesting moves as Oil prices are testing four month lows after falling below the critical $50 psychological price point.
In this article, we’re going to try to condense the mayhem in order to focus on three of the most pertinent price action themes for this week.
U.S. Dollar & U.S. Stocks Await the Fed
The big ‘a-ha’ moment that gave markets the realization that the Fed was hawkish and looking to hike in March appeared to take place in the latter portion of the Tuesday trading session two weeks ago. This was about 4-5 hours before President Trump delivered his Joint Address to the Union; but the driver appeared to show up well-ahead of President Trump ever taking the podium. The spark appeared to emanate from a speech hosted by San Francisco Fed President, Mr. John Williams in which he talked-up the prospect of three full hikes this year. This gave a quick-move higher to the Greenback, and later in the evening but still ahead of the Joint Address to the Union, noted Fed-Dove, Lael Brainard also offered some hawkish comments that made March look like a much more likely target for a hike.
Since then, odds for a hike in March flew from around 40% before these drivers showed-up to nearly 100% today. But price action in the Greenback appears to have run-in to a key level of resistance that’s thus far been unable to break. After setting a fresh-high at 102.25 just after those drivers showed-up, the Greenback made a second attempt to overtake that level just a few days later, but was rebuked again, giving us a double-top formation in DXY. Since that second inflection of resistance, bulls have been unable to hold-up price action as the Dollar has fallen back towards the range that it was in before Mr. Williams’ comments showed-up.
