Well, the FOMC minutes release is nearly upon us. It is time to evaluate your open positions and make sure that risk is properly aligned with reward. Let’s take a brief look at where the markets are at and where they may be going.

Ill-Advised Trades Cost Money. Caution Can Be A Good Word!

Currently, the markets are relatively calm. U.S. indices are up moderately, WTI crude oil is near flat, and the USD is down against many of the majors.

Today’s trading ranges across the forex majors:

Pair           Trading Range

AUD/USD      36 pips

EUR/USD      64 pips

GBP/USD      46 pips

NZD/USD      36 pips

USD/CAD      42 pips

USD/CHF      50 pips

USD/JPY       51 pips  

The USD is showing weakness, pronounced by the directional move in today’s EUR/USD market. However, we all know that can change in seconds following the FOMC release at 2:00 PM EST.

Today’s U.S. Market Sentiment

U.S. government bonds remained nearly unchanged in this morning’s trade. Auctions for the 10 year U.S. Treasury note came in at 2.343%, up moderately from Tuesday’s yield of 2.339%.

According to the CME Group, investors are estimating that there is over a 90% chance of a rate hike occurring in December. This is a considerable shift in sentiment, as last month’s estimates gave a rate hike only a 40% chance.

Bottom Line: To be honest, I was surprised that we did not see a rate increase from the U.S. Federal Reserve last month. The booming U.S. equities markets coupled with political tension between the FED and Trump administration appeared to have set the stage for a fourth-quarter tightening of the dollar.

The truth is, inflation just isn’t where the FED thought it would be going into last month’s meeting. I expect to see strong verbiage towards a December rate hike in today’s FOMC minutes release. Of course, so do many in the market.

Remember, we are looking for surprises! If a coming raise in rates looks to be off the table, then we will see immediate volatility. No matter your view, watch the risk and trade smart!