RJO FuturesCast

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Transcript for: Daily Market Update – Currency Futures – 9/22/2017


Good morning traders! John Caruso coming to you here for the morning of September 22nd with your currency outlook for today.


FOMC Meeting

First we’ll take a peek back at Wednesday’s FOMC announcement. We did see the “mother of doves”, Janet Yellen, actually leaned slightly hawkish placing a possible December rate hike back on the table. We saw the Fed watch tool move from a 55 percent chance for a December rate hike just before the meeting, to the next morning following the meeting up over 70 percent. So now there’s about a 70.5 percent chance they raise interest rates in December. This is all on the heels of the hawkish data that we saw, and the growth accelerating data that we saw, out of the United States in August. We also did see Janet Yellen revise GDP higher as well, the 2.4 percent. All the while admitting that they’re still having a problem with inflation in meeting their 2% mandate. They actually came out and admitted that they’re not quite sure what the forces are that’s holding back inflation from hitting their 2% targets. So very interesting to see them revise growth higher, but also say they’re still having a problem with inflation. We also, looking forward to next year, they’re forecasting three interest rate hikes for 2018, 2019 they’re forecasting two interest rate hikes, and then 2020 they’re looking at one interest rate hike. Which I think is absurd to be able to forecast that far out, but that’s what we’re running with at the moment. They also mentioned that they’re going to be unwinding the balance sheet. We’ve got a four and a half trillion dollar balance sheet right now that the feds been carrying for the last six/seven years since the beginning of the QE. They’re going to begin to unwind that starting next month, and they’re going to try to do that about I believe a 600 billion dollar per year clip. They’re going to try to unwind that four and a half trillion dollar balance sheet.


US Dollar

So how did the market react after the meeting? With Janet Yellen leaning slightly hawkish on December, revising growth higher, we did see a big rip in the US dollar. We saw a nearly hundred point push higher in the USD to 92.49 I believe was the high. However today we’re back trading right around that 92 area, so the market dropped bagged about 50 points since that mean. So what’s going on in the market? You know, those are questions that we’re trying to ask ourselves right now. Right now you’ve got growth accelerating here in the United States, we also have a potential bottom in interest rates. If you notice the 10-year yield, we went from 2.02% right around the time Irma was making its way up through the Caribbean. We hit 2.02%, after the Fed we hit 2.29%. In about a week’s time, week and a half’s time, we saw a twenty seven basis point move in the 10-year which is a very big move in that amount of time. So these are the questions that we’re kind of asking ourselves right now trying to figure out what the next big move in the US dollar is going to be. Is it going to be back to the downside, or back to the upside?



Inversely looking at the euro currency, 119 17.5, that was following the announcement. We saw a big plunge in the euro, however this morning we’re coming back in around 1 2020 so the markets back up there. I don’t know if we’re in a topping process in the euro currency or what’s going on there, but again we’re trying to nail that next big move in the Euro. We did hear from Mario Draghi this morning, he mentioned that the eurozone is still having problems meeting their inflation mandates as well. So that could be a catalyst that provides a near-term top in the euro as well. So we’re still just kind of waiting and watching for specific support levels to be taken out in the euro. But still, I mean if you look at the chart right now I mean we’re straight up since about May. So the trend is still very bullish I think until we close back below 118 80 is the target. Could we see that being a tipping point for the euro currency? So I know that’s a trade a lot of people have been struggling with.


Japanese Yen

The yen seems to have been front running the FOMC announcement. We did see it peak about a week prior at 93 15 and we’re dropped all the way back to 89 56. I still think we can see some more near-term downside in the end before potential bottom is placed in.


Canadian Dollar

Real quick I’m going to touch on the Canadian as well because we did see Canadian retail sales and Canadian seat CPI come out this morning. Retail sales headline beat 0.4% vs. 0.2%. We did see a nice move and higher in the Canadian however we’re about 30/40 points off the high right now a CPI headline CPI missed. So the Canadian still struggling versus the US dollar, we still might see them work downside here in the near term.


Once again I’m John Caruso, feel free to reach out to me at the desk if you have any more questions. Thanks a lot!

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John Caruso

Senior Market Strategist
Follow John on Twitter @JCarusoRJO. John began his career at Wilshire Quinn Capital, a Wealth Management Firm based out of Los Angeles, California. John made his move to the commodity industry at the end of 2005, and began his path at Lind Waldock, at the time the largest retail brokerage division worldwide. John did his undergraduate work at Robert Morris University in Pennsylvania from 1999-2003, where he was a 4 year varsity basketball letterman.  A self-professed “Macro Trader”, John uses a multi-factor fundamental and “quantamental” trading model in distinguishing market cycles based upon the accelerations or decelerations of growth and inflation metrics. His technical and quantitative approach is heavily reliant upon trend and market range analysis via a custom built standard deviation system in helping him make probability-based market decisions. John is an avid reader of all things pertaining to finance, and behavioral economics. Click here to sign-up for John Caruso's Trading Coach Insights. Daily information and insight on all futures marketsin ranging from metals to equities.
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