Thursday, February 5, 2015

EDM5 Taking Lion’s Share of Attention

EDM5 Traded to a new 3+ week low yesterday and matched that low again today at 99.61.  The contract has attracted an outsized portion of trading volume over the last week and many are anxious to learn what the Fed plans are concerning their language use at the upcoming March 17-18 FOMC meeting.  If they remove the term ‘patient’ they will be advising market participants that they are giving themselves the option of raising the policy rate as early as June.  Of course the Fed has always had that option of moving policy rates at any time, but in the interest of stability and a want for transparency, the guidance had been laid out by Yellen that the patient language meant no policy rate move over the next two meetings.  To remove ‘patient’ language would then open the door for, but not guarantee a June move.    

The technical condition for EDM5 is weak and I have suggested that a settle below 99.62 would open the door for a move to 99.54 in rather short order.  We have looked at reasons beyond the above for the Fed to at least begin the process of ‘normalization’ and continue to expect that such an action will bring greater stability to markets and form a basis from which stronger growth and risk taking will resume. 

See Hilsenrath WSJ blog today for his take. 

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