Finally, the Federal Reserve June meeting is here as today the all-important FOMC (Federal Market Open Committee) statement will be released in the second half of the North American session.
We’re talking about the most important central bank in the world and the fate of the US dollar for 2015 or at least for the summer is decided.
Most likely not the actual interest rate decision will be key, but the press conference and the economic projections that follow as all eyes will be on the language Mrs. Yellen is going to use and the tone as well. If they are going to be hawkish, then equities will stay neutral or fall, but on a bearish or dovish tone for the dollar, then equities may spark higher.
The way the US dollar is moving is crucial for companies like Procter and Gamble (NYSE: PG) as their previous results were affected by a stronger dollar. In general, companies that are exporting a lot of their goods/services such as P&G, and have activities in almost every country in the world are strongly dependent on the way the US dollar reacts.
A stronger currency always brings difficulties for net exporters, as goods are becoming increasingly difficult to sell.
With stock indices making all-time highs all over the world this 2015 due to the quantitative easing programs that are inflating assets, P&G stock price actually fell since December 2014 when the price hit the $90/share range.
Moreover, in doing that, the move to the downside seems to be almost identical with the spike higher and this resembles a spike seen most often in a reversal pattern called “head and shoulders”.
That being said, the market should form a consolidation area for the right shoulder and this implies a bounce is in cards that should take the price from the current $79.10/share to the $84/share.
Such a level may be the perfect striking price for a put option with a one-month expiration date as it’s likely that bears will step in around that area.
The key to such a move is with the Fed statement and press conference as it is well known the fact that equities and interest rates have an inversed relationship.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
