The US Fed is Prepared to Raise Rates in September According to Minutes
The general tune of the notes illustrates the FOMC as cautiously optimistic. The catalyst for this caution is the recent troubles in Greece and China. An unnamed member of the discussion was ready to hike rates last month, but further proof in the form of an increase in economic activity or inflation was needed to back it up. The other prevailing voices in the discussion are concerned that any action taken now will adversely affect the economy in the future, especially an increase in interest rates. Surely, caution is needed considering the potential for another downtick in inflation following recent losses in oil prices. While the news is certainly volatile, the resulting movement in the financial sector was less than parallel, as the NYSE crashed after a glitch in the system halting all trading on the exchange.
Crude prices fell again yesterday after inventory numbers were published yesterday, scratching the surface of historical cycle production highs. Over 380,000 barrels of oil were added to storage in excess of last week’s count. Despite a small increase in demand as reported by the Energy Information Administration, the price of WTI fell over $1.70, quickly usurping the good news. However, crude prices did rebound to almost fully recover earlier downside. Oil rig number reports courtesy of Baker Hughes may cause additional movement in oil prices today, in particular if the numbers show an increase. The almost eight month downward trend may exhibit a surprising reversal higher after last week’s small rise.
Following the notorious report released last week regarding the Greek debt situation, the IMF is urging for a restructuring of Greece’s monetary obligations. This will hopefully give a more reasonable path for repayment for the Greeks. The Managing Director of the International Monetary Fund was heard yesterday supporting this resolution. Even as Germany calls for the exact opposite, a stricter and more urgent plan, Greece is most likely unwilling to consider these demands and move towards a default and the eventual introduction of a non-Euro currency.
CAC-40 Descending Triangle Trading Opportunity
European stocks continue to face the uncertainty of a Greek exit even after a brief relief rally this morning following the reopening. Regional benchmarks like the French CAC are trending near levels last seen at the beginning of the year as uncertainty drives risk aversion. The worsening outlook and unwillingness of European creditors to consider debt relief and restructuring are adding to the volatility experienced in stocks over the last few sessions. The descending triangle pattern setting up in the CAC-40 Index has a bearish bias with support at 4602 proving the key level for the technical formation. A move below this level would indicate a downside triangle-based breakout to be accompanied by increased momentum. Should however prices rise above the near-term downtrend line, this could signal a potential reversal to the upside.
Wishing you a successful trading day,