FOMC On Watch 

US stocks and the US Dollar are back in focus today ahead of the FOMC minutes tonight. Fed expectations have been shifting wildly in recent weeks as traders continue to grapple with the prospect of a further hike in June or potential pause from the Fed. Pricing for a further .25% hike in June is currently sitting around 33%, down from highs of around 40% last week but up from lows of below 10%, to give an idea of how expectations have been shifting.

Debt Ceiling Impact 

US debt ceiling uncertainty is one key factor here. Safe-haven demand for USD has been a major supporting element for USD recently. Simultaneously, the prospect of an historic default seems to argue against a further hike from the Fed given the huge economic implications of such an event.

Mixed Fed Comments

Recent Fed commentary has been mixed. Several Fed members have called on the need for further tightening while some have voiced support for a pause. Chairman Powell himself noted that he was in favour of a slower pace with the back of tighter credit conditions requiring less tightening than was previously thought.

Market Implications 

With this in mind, today’s minutes hold the power to drive expectations one way or the other. If Fed members were seen to be broadly in favour of a further hike in June, this should propel USD higher near-term, dragging stocks and commodities lower. However, if members appeared to be more on the side of a pause, then USD is likely to come under pressure allowing risk assets to climb.

Technical Views

NASDAQ

The index is hovering around the 13752.6 level for now following a brief test above the level yesterday before the market reversed. Momentum studies are weakening here, warning of a further correction. While we hold below the level, 13237.4 is the next support to note, along with the bull channel lows which need to be defended to maintain the broader bullish bias. To the topside, 14288.2 is the next objective for bulls.