Let’s review yesterday first... The judgment of the large range before yesterday's speech was fine... Although the opportunity to touch 11.50 on the high side was missed... the low long at 11.20w still held up.
But the mindset is still not right; the first warehouse at 11.25 bounced to 11.31 but didn’t go up, so I closed it out after it came down.
Woke up from the second warehouse on 11.21 to find that all night long it was suppressed by a small sell order of 1129, and uncertain after the Asian session, I simply took a 600-point exit.
As a result, it broke out upwards... If that’s the case, then so be it...
Based on the current range, there shouldn’t be any major movements before the speech at 10 PM tonight, right? It should just fluctuate around here until the speech...
Let’s first take a look at the current institutional and market positioning regarding tonight's speech...
From the perspective of interest rate cut expectations, the latest expectations on CME have dropped to about 72~75%... (because three regional Fed presidents made statements yesterday to cool down the interest rate cut) so it has dropped from over 90% a few days ago to the current range...
Summarizing the views of various institutions so far:
Goldman Sachs: Small dovish, does not expect Powell to clearly signal a rate cut in September, but the speech may confirm concerns about the labor market, supporting a gradual easing. The speech will focus on adjustments to long-term goals rather than short-term policy signals, avoiding excessive market interpretation.
Morgan Stanley: Slightly hawkish, may maintain a wait-and-see approach, not in a hurry to cut rates; speeches may emphasize that inflation risks are higher than labor market weaknesses.
The New York Times: The expected emphasis on the trade-off between labor market weaknesses and rising inflation may suggest easing but does not commit to a specific timeline.
But I'm not sure, I think Powell might still lean more towards neutrality or slight hawkishness. Just like the previous FOMC, it depends on the data... After all, there are still several batches of data to look at before the September decision (like the PCE at the end of the month)
Anyway, guessing is useless... I don't want to bet so early. Let’s talk about it after it’s announced and then trade.
Over the past week, the market has actually priced in this expectation in advance... So even if the speech is truly neutral and data-driven, the market reaction should not be too large...
To summarize, that is
Slightly hawkish drop (hinting or stating no rate cut in September)
Neutral or slightly hawkish sideways (decided by data)
Small dovish uncertainty (for example, only hinting at a September rate cut, not implying further easing) because it could either sell the news with a slight dip... or it could directly shift from the current 75% probability to nearly 100% probability and rise.
But if the probability is now over 90%, then the small dovish is sell the news. Under the current 75% probability, the small dovish may not necessarily be sell the news... So it’s hard to manage, the market will decide.
Big dovish rally (for example, suggesting interest rate cuts + implying further easing/a second interest rate cut within the year)
Today's operational thinking is a bit difficult...
Let’s decide after the speech... It’s easy to get burned by pre-placed orders in front of major events...
If it’s a neutral tone, then from tonight to the weekend, I will still consider the large range of 11.2~11.5w set yesterday, and think about the positions that can be made in between over the weekend. If it breaks the range, I’ll exit and observe...
If the small dovish sell the news causes a decline, then I will consider buying a wave even below 11.2... If it breaks 11, then I’ll exit... (If it breaks 11, is the small dovish judgment wrong?)
If it’s slightly hawkish? The contracts should be withdrawn, and prepare to wait for opportunities to cash out the spot...