US Equities Weaken Amidst Hawkish Fed Shift
Stocks Slipping From Highs
US stocks are on watch today with the S&P futures heavily in the red as the US Dollar continues to push higher. A firmly hawkish shift from the Fed last week has seen market pricing for a Fed hike by year end jumping above 80%. In line with this we’ve seen USD breaking out above the DXY $100 level. With a bullish USD break underway, stocks look vulnerable to further downside near-term as traders recalibrate following the FOMC. Indeed, it seems that any risk-positive impact from ongoing US/Iran negotiations has so far been offset by the shift in Fed expectations. While this could change once traders have fully digested the FOMC fallout, for now downside risks remain.
US Data & Fedspeak
Looking ahead this week, focus will be on incoming US data with core PCE, final GDP and weekly jobless claims due tomorrow as well as a slew of Fed speakers between now and the weekend. Given the hawkish shift in the Fed’s projections, commentary this week is likely to lean to the hawkish side which could provide fresh fuel for the USD rally, weighing further on stocks into next week. Additionally, any upside surprise in tomorrow’s PCE data should also create stronger headwinds for stocks.
Technical Views
ES (S&P Futures)
The reversal from June highs has carved out a potential double top, with strong bearish divergence in momentum studies. For now, price remains within the bull channel but if we break below 7,362 this will open the way for a test of the neckline at 7,240.25. This is a key zone to watch with bulls needing to defend that level to maintain the broader bull bias. Below there, the picture turns more deeply bearish towards the 7k level next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.