"Not a rate cut in sight..." - USD likely to find support on Fed minutes

\"Not a rate cut in sight...\" - USD likely to find support on Fed minutes

David Karsbøl is short EUR/USD ahead of minutes from the May 9 FOMC meeting, and futures strategist Philip Carlsson comments on the short term view for the July wheat contract



Head of market strategy David Karsbøl is positioned for short-term USD upside ahead of tonight’s release of minutes from the FOMC’s May 9th meeting:

“The wording may have changed, but they cannot possibly have been discussing a rate cut,” says Karsbøl. “Any way you cut it, this is dollar-supportive, especially with any inference about inflation or nods to solid US economic growth. Short EUR/USD is the best place to be in the scenario, which is the only major dollar pair with the real potential to break on FOMC today, possibly even testing 1.3370 Fibonacci retracement.” Karsbøl adds that JPY pairs seem to have lost upside momentum for the current session. CAD, which we predicted to sell off on inaction from the Bank of Canada yesterday (which did indeed leave rates unchanged). Instead, after an initial selloff, CAD reverted massively in a spate of “hand over fist” buying and is now massively overbought. “The Canadian dollar has had a frightening history over the past 2-3 months of being picked up despite grotesque technicals,” says Karsbøl. “Just when the technical picture is looking most discouraging, CAD tends to find buyers and post extremely bullish activity before being quickly capped. Again, this is a trend that’s emerged over the past few months. The market might have been overly pessimistic 2-3 months ago, and is now overly optimistic. Another factor is the correlation with energy prices – when sentiment on energies is bullish, it tends to be CAD-supportive. But this is a spurious correlation at best – oil is moving lower these days, and still, CAD is being bought.”

Equity strategist Christian Svendsen expects limited drawbacks on US stocks today ahead of a triple-crown of market-moving data releases: FOMC minutes tonight, GDP tomorrow, NFP Friday. Svendsen and Karsbøl concur that markets will see no larger implications of an overnight move by China to treble its stamp tax on securities, despite superficial assumption that such a move would dissuade investors from risky assets.

Futures strategist Philip Carlsson is positioned on the short side of grain today, noting that precipitation in the US and Europe should bring redoubled downside to the wheat market, which could slide as much s 12 cents to 479.75 . The July wheat contract is particularly vulnerable to additional downside after rejecting the upper trend line at 502.50. “Much of the market activity is anticipatory ahead of the June 29 release of the USDA’s Planted Acreage Report, which will provide direction for grain markets for the rest of the summer, while adding volatility to grain contracts into mid-June,” says Carlsson.