FED Day: NQ Futures planCME_MINI:NQ1!
Today is FOMC day; however, there is a larger geopolitical risk looming, along with the trade war and tariffs situation unfolding.
Recently, we have noted inflation moving lower, although it is not yet at the FED’s 2% target. Retail sales fell sharply last month. Tariffs have not yet resulted in inflation so far, partly due to the 90-day pause, and with possible extensions, some deals agreed upon, and a framework for others in place, tariff uncertainty has considerably reduced.
On the contrary, lower energy prices that supported lower inflation have risen due to ongoing geopolitical issues. Risks remain high for elevated energy prices even if supply and sea routes remain unharmed. In our view, this is due to the fragility of the situation and what it would take to turn the ongoing war into the worst possible outcome.
The FED releases their Summary of Economic Projections. Key data points will be inflation and growth projections, along with interest rate projections and any talks about neutral rates and expected cuts, given the bleak global outlook and growth. The FED is otherwise expected to hold rates steady in this meeting.
Given this, and what Chair Powell says in the FOMC press conference, their commitment towards driving inflation lower versus maximum employment, risks on the growth and employment side have started to worsen. If rate cut bets are moved forward or if markets price in more rate cuts than currently priced in, we may see equity index futures make further gains.
NQ futures are coiling; the yearly VPOC has shifted higher, as we explained in our previous analysis.
Today’s meeting may be key for further fuel higher or lower, depending on how it pans out. Market participants are in a wait and see mode. Markets are accepting higher prices and break of balance is key to determine the direction price may be headed in. Until otherwise proven, markets are range bound and mean reverting from June Composite Volume Profile towards monthly VWAP and VPOC.
