Digesting the FOMC


FED TAKEAWAY - So here's my quick takeaway from the Fed decision. We got a slightly upgraded outlook in the labor market, while at the same time, the Fed removed its language that energy prices had stabilized. Overall, there wasn't much to chew on here and futures markets agreed, with expectations still around 40% for a rate hike in September. Data dependency is the name of the game and the Fed's strategy has always been to err on the side of caution. I am in the camp that believes we will see a rate hike in September, but as per my recent commentary, I don't think this will necessarily be US Dollar supportive. Remember, the Fed Chair has stressed the importance of focusing on the pace of rate increases rather than the initial increase itself. For now, attention will shift to today's US GDP release, with the result to potentially have more of a market moving influence that Wednesday's Fed decision, in light of Fed data dependency.

STRATEGY - As far as the FX market reaction is concerned, the market seemed to initially take the Fed statement as more on the hawkish side (but we are splitting hairs here), with the Buck rallying across the board. Still, I wouldn't get sucked in to the latest Dollar rally and would recommend sitting back and waiting for the moment. Overall, I think we are locked in some choppy consolidation and I wouldn't rule the possibility for a US Dollar selloff on Thursday. As per my trading over the past few months, I will once again look to sell the SPX500 into this rally back above 2100, perhaps this time around 2118 (78.6% of recent move). I am also watching GOLD very closely and would be thrilled to buy the metal into another sharp dip to fresh lows. As always, I won't force anything and will wait for the market to come to me. July is coming to a close, which means the JKonFX portfolio will be winding up its first twelve months. We are up well over 30% and I am delighted with the results.

Another chance to sell SPX500 into a rally. Via @joelkruger

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