Fed raises rate by 50 points to 1.0% - in line with expectations (neutral for the dollar and equities)
Start of quantitative tightening from 1 June. Initially at $47.5B per month, gradually bringing it to $95 per month - softer than expected (moderately negative for the dollar, positive for equities)
Start of quantitative tightening from 1 June. Initially at $47.5B per month, gradually bringing it to $95 per month - softer than expected (moderately negative for the dollar, positive for equities)
Bitcoin needs to consolidate above $40K to approve the reversal
Bitcoin soared 4.2% overnight, getting close to the meaningful $40K round level, although there is a $400 retreat from the peaks early on Thursday.
Bitcoin rose to its highest level in almost two months amid a sharply weaker dollar and rising stock indices.
If Bitcoin manages to attract new buyers at levels above $40K by the end of the week, we could see a significant expansion in buyer optimism. Some potential buyers are now waiting for reliable signals to break the downtrend of the last month and a half. Yesterday’s upside momentum took the price above the downtrend line, but a confirmation signal in the form of a rise above the previous local highs is also needed.
📣Trade responsibly at fxpro.com
Bitcoin soared 4.2% overnight, getting close to the meaningful $40K round level, although there is a $400 retreat from the peaks early on Thursday.
Bitcoin rose to its highest level in almost two months amid a sharply weaker dollar and rising stock indices.
If Bitcoin manages to attract new buyers at levels above $40K by the end of the week, we could see a significant expansion in buyer optimism. Some potential buyers are now waiting for reliable signals to break the downtrend of the last month and a half. Yesterday’s upside momentum took the price above the downtrend line, but a confirmation signal in the form of a rise above the previous local highs is also needed.
📣Trade responsibly at fxpro.com
Fed’s less hawkish tone triggers dollar correction, equities pullback
[1/2]
Last night the US Fed raised its rate by 50 bp and announced the looming start of asset sales from its balance sheet.
The market expected these things, but the details and forecasts were a little less hawkish, which played against the dollar and favoured the equity market. We should expect that the market’s adjustment to the Fed’s comments could stretch over several days or even begin a longer trend of market recovery.
The main points we saw:
• A later start. The Fed will start selling in June, whereas markets were expecting this move as early as May.
• A more cautious beginning. $47.5bn worth of paper will be sold in the first three months, while minutes from the previous meeting indicated that the FOMC discussed $95bn in sales per month. The Fed will not release the latest figure until three months later.
• A cap on rate hike step: Powell has rejected the idea of a 75-point rate hike at the next meeting.
Although the states last saw a rate hike of 50 points 22 years ago, the current moves should be perceived as softer than many observers estimate. From this point of view, the Fed maintains some continuity with the previous course and takes the first step more diminutive than the markets expect.
It may well be that an unexpected decline in GDP for the first quarter, according to a preliminary estimate, worked on the Fed’s easing rhetoric. It is also possible that the FOMC is looking with apprehension at the ballooning foreign trade deficit as evidence of a decline in the competitiveness of US goods.
[1/2]
Last night the US Fed raised its rate by 50 bp and announced the looming start of asset sales from its balance sheet.
The market expected these things, but the details and forecasts were a little less hawkish, which played against the dollar and favoured the equity market. We should expect that the market’s adjustment to the Fed’s comments could stretch over several days or even begin a longer trend of market recovery.
The main points we saw:
• A later start. The Fed will start selling in June, whereas markets were expecting this move as early as May.
• A more cautious beginning. $47.5bn worth of paper will be sold in the first three months, while minutes from the previous meeting indicated that the FOMC discussed $95bn in sales per month. The Fed will not release the latest figure until three months later.
• A cap on rate hike step: Powell has rejected the idea of a 75-point rate hike at the next meeting.
Although the states last saw a rate hike of 50 points 22 years ago, the current moves should be perceived as softer than many observers estimate. From this point of view, the Fed maintains some continuity with the previous course and takes the first step more diminutive than the markets expect.
It may well be that an unexpected decline in GDP for the first quarter, according to a preliminary estimate, worked on the Fed’s easing rhetoric. It is also possible that the FOMC is looking with apprehension at the ballooning foreign trade deficit as evidence of a decline in the competitiveness of US goods.
[2/2]
It took April for equity and bond markets to put the latest hawkish scenario into prices, and it might take a week or two to adjust to the new position. But investors should be aware that the Fed is not jumping from one extreme to the other. Rather, it is methodically remaining more accommodative than the market expects it to be. This approach is moderately stimulative for the stock market.
The situation with USD is more complicated as its FX movements are also based on monetary policy from other central banks. While sounding softer than market expectations, the FOMC is still more hawkish than its main competitors - the ECB, the Bank of Japan and the Bank of England. Despite commensurate inflation and a rather strong labour market, the latter is expected to raise rates by 25 points today.
Therefore, a new upward momentum could follow a brief pullback in the US currency until competitors gain the same or more speed than the Fed.
📣Trade responsibly at fxpro.com
It took April for equity and bond markets to put the latest hawkish scenario into prices, and it might take a week or two to adjust to the new position. But investors should be aware that the Fed is not jumping from one extreme to the other. Rather, it is methodically remaining more accommodative than the market expects it to be. This approach is moderately stimulative for the stock market.
The situation with USD is more complicated as its FX movements are also based on monetary policy from other central banks. While sounding softer than market expectations, the FOMC is still more hawkish than its main competitors - the ECB, the Bank of Japan and the Bank of England. Despite commensurate inflation and a rather strong labour market, the latter is expected to raise rates by 25 points today.
Therefore, a new upward momentum could follow a brief pullback in the US currency until competitors gain the same or more speed than the Fed.
📣Trade responsibly at fxpro.com
BoE hike rate to 1%, but point clouded outlook
As analysts had expected, the Bank of England raised the rate by 25 points to 1.0%. Three of the nine monetary policy committee members called for a 50-point increase at once, and there were hints in the comments that a 50-point increase could be an option at subsequent meetings.
At the same time, the Bank of England has worsened its economic outlook for 2023, expecting the economy to contract in response to tight financial conditions and the effects of high energy prices. The currency market sees the recession as a notable negative factor, putting pressure on medium and long-term interest rates.
As analysts had expected, the Bank of England raised the rate by 25 points to 1.0%. Three of the nine monetary policy committee members called for a 50-point increase at once, and there were hints in the comments that a 50-point increase could be an option at subsequent meetings.
At the same time, the Bank of England has worsened its economic outlook for 2023, expecting the economy to contract in response to tight financial conditions and the effects of high energy prices. The currency market sees the recession as a notable negative factor, putting pressure on medium and long-term interest rates.
#GBPUSD collapsed to 1.2380 by 2% or more than 230 pips from the start of the day on Thursday, with pressure intensifying after the Bank of England’s bank rate decision announcement.
After consolidating over the last few days and attempting a rebound yesterday after the FOMC, GBPUSD has moved sharply back down and updated to lows from June 2020, a strong bearish signal.
The pair runs the risk of slipping to 1.2000, an area proven to be the Pound’s last line of defence more than once in previous years, without much of a hurdle.
The significant support of the previous six years and the 161.8% Fibonacci target from the last declining momentum since late April are concentrated here.
📣Trade responsibly at fxpro.com
After consolidating over the last few days and attempting a rebound yesterday after the FOMC, GBPUSD has moved sharply back down and updated to lows from June 2020, a strong bearish signal.
The pair runs the risk of slipping to 1.2000, an area proven to be the Pound’s last line of defence more than once in previous years, without much of a hurdle.
The significant support of the previous six years and the 161.8% Fibonacci target from the last declining momentum since late April are concentrated here.
📣Trade responsibly at fxpro.com
#WaveAnalysis
#Nikkei225 reversed from resistance area
• Likely to test support level 26500
Nikkei 225 index recently reversed down from the resistance area located between the key resistance level 27425 (which has been reversing the price from last month), upper daily Bollinger Band and the 50% Fibonacci correction of the downward impulse from March.
The downward reversal from this resistance area stopped the previous ABC correction 2.
Nikkei 225 index can be expected to fall further toward the next support level 26500.
📣Trade responsibly at fxpro.com
#Nikkei225 reversed from resistance area
• Likely to test support level 26500
Nikkei 225 index recently reversed down from the resistance area located between the key resistance level 27425 (which has been reversing the price from last month), upper daily Bollinger Band and the 50% Fibonacci correction of the downward impulse from March.
The downward reversal from this resistance area stopped the previous ABC correction 2.
Nikkei 225 index can be expected to fall further toward the next support level 26500.
📣Trade responsibly at fxpro.com
#WaveAnalysis
#GBPUSD falling inside impulse waves (iii),3 and (3)
• Likely to fall to support level 1.2250
GBPUSD currency pair recently broke the key support level 1.2670 (low of wave (B) from the end of 2020).
The breakout of the support level 1.2670 accelerated the active weekly downward impulse waves (iii),3 and (3).
Sterling can be expected to fall further toward the next support level 1.2250 (former support pivot from the middle of 2020).
📣Trade responsibly at fxpro.com
#GBPUSD falling inside impulse waves (iii),3 and (3)
• Likely to fall to support level 1.2250
GBPUSD currency pair recently broke the key support level 1.2670 (low of wave (B) from the end of 2020).
The breakout of the support level 1.2670 accelerated the active weekly downward impulse waves (iii),3 and (3).
Sterling can be expected to fall further toward the next support level 1.2250 (former support pivot from the middle of 2020).
📣Trade responsibly at fxpro.com
👍1
#WaveAnalysis
#USDJPY reversed from support area
• Likely to rise to resistance level 131.20
USDJPY recently reversed up strongly from the support area located between the key support level 128.90 (former resistance from last month) and the 50% Fibonacci correction of the upward impulse from April.
The upward reversal from this support area is likely to create the daily candlesticks reversal pattern Bullish Engulfing.
Given the strong daily uptrend – USDJPY can be expected to rise further toward the next resistance level 131.20.
📣Trade responsibly at fxpro.com
#USDJPY reversed from support area
• Likely to rise to resistance level 131.20
USDJPY recently reversed up strongly from the support area located between the key support level 128.90 (former resistance from last month) and the 50% Fibonacci correction of the upward impulse from April.
The upward reversal from this support area is likely to create the daily candlesticks reversal pattern Bullish Engulfing.
Given the strong daily uptrend – USDJPY can be expected to rise further toward the next resistance level 131.20.
📣Trade responsibly at fxpro.com
#Bitcoin was down more than 10% intraday on Thursday, stabilising at $36.4K from the end of the day and losing 8.3% overnight. Ethereum lost 6.7% in the last 24 hours, while other leading altcoins in the top 10 fell from 5.6% (DogeCoin) to 14% (Avalanche).
Total cryptocurrency market capitalisation, according to CoinMarketCap, fell 7.6% overnight to $1.67 trillion. The Bitcoin Dominance Index fell 0.4% to 41.5%, as the most institutionalised coins took the brunt of the hit.
The cryptocurrency Fear and Greed Index fell 5 points to 22 by Friday and moved back into “extreme fear” status.
On Thursday, Bitcoin fell sharply in the US session, losing more than $3,000 in a few hours and closing the day at its lowest level since late January. Once again, the pressure came from the US stock and bond market, where traders were furiously pricing in a sharp tightening of the Fed’s monetary policy in June after a day’s break.
📣Trade responsibly at fxpro.com
Total cryptocurrency market capitalisation, according to CoinMarketCap, fell 7.6% overnight to $1.67 trillion. The Bitcoin Dominance Index fell 0.4% to 41.5%, as the most institutionalised coins took the brunt of the hit.
The cryptocurrency Fear and Greed Index fell 5 points to 22 by Friday and moved back into “extreme fear” status.
On Thursday, Bitcoin fell sharply in the US session, losing more than $3,000 in a few hours and closing the day at its lowest level since late January. Once again, the pressure came from the US stock and bond market, where traders were furiously pricing in a sharp tightening of the Fed’s monetary policy in June after a day’s break.
📣Trade responsibly at fxpro.com
👍2
Dollar as a safe haven of last resort
The dollar index renewed its highs in almost 20 years, surpassing 104, as crucial US currency rivals one by one lost buyer support.
Suddenly the dollar was a safe haven of last resort. In 2018 and 2020, the dollar was approaching current extremes amid a total sell-off in equities and commodities. But in those years, flight to safety forced demand for the yen and franc, which is not the case this time as both ‘havens’ are at multi-year lows with equity markets falling.
The Dollar Index has been testing the upper end of its trading range for the last six years, and it now has a much higher chance of holding above that level. The previous two times the DXY got close to 104, the economy and inflation needed stimulus, not cooling as they do now.
The dollar index renewed its highs in almost 20 years, surpassing 104, as crucial US currency rivals one by one lost buyer support.
Suddenly the dollar was a safe haven of last resort. In 2018 and 2020, the dollar was approaching current extremes amid a total sell-off in equities and commodities. But in those years, flight to safety forced demand for the yen and franc, which is not the case this time as both ‘havens’ are at multi-year lows with equity markets falling.
The Dollar Index has been testing the upper end of its trading range for the last six years, and it now has a much higher chance of holding above that level. The previous two times the DXY got close to 104, the economy and inflation needed stimulus, not cooling as they do now.
This is a sharp reversal in attitude to the dollar, which in 2021 was often described as losing its value and leading currency status. While its relevance as a means of payment continues to be debated and questioned, its increasing rate, coupled with more attractive US government bond yields, makes the dollar an almost uncompromising choice at the moment.
European or Japanese politicians can hardly be expected to be complacent about the depreciation of their currencies, further fuelling inflation and exacerbating economic problems.
The Japanese authorities seem to have successfully talked the markets down at the end of April by stopping the yen’s decline near 130. Over the last couple of days, we have seen an intensification of policymakers and economic institutions from Continental Europe, indicating the need to raise rates soon to match the pace of tightening from the Fed.
At current levels, the dollar has found itself in a zone of turbulence, which clearly shows the scope for the GBPUSD to fluctuate over the last 24 hours. A consolidation above 104 at the end of the week would confirm to markets that the next technical stop for the DXY could be around 120, which is the high of the early part of this century.
📣Trade responsibly at fxpro.com
European or Japanese politicians can hardly be expected to be complacent about the depreciation of their currencies, further fuelling inflation and exacerbating economic problems.
The Japanese authorities seem to have successfully talked the markets down at the end of April by stopping the yen’s decline near 130. Over the last couple of days, we have seen an intensification of policymakers and economic institutions from Continental Europe, indicating the need to raise rates soon to match the pace of tightening from the Fed.
At current levels, the dollar has found itself in a zone of turbulence, which clearly shows the scope for the GBPUSD to fluctuate over the last 24 hours. A consolidation above 104 at the end of the week would confirm to markets that the next technical stop for the DXY could be around 120, which is the high of the early part of this century.
📣Trade responsibly at fxpro.com
👍1
🔔Be prepared for NFP! 💵
🔜It's jobs day today, and the US employment data for April will be released later at 12:30 GMT. Forecasts suggest that the economy created 390k jobs for the month, slightly worse than the 431k a month earlier.
This is almost double the long-term trend growth in employment (around 200k a month), which continues to push down the unemployment rate. It is expected to fall to 3.5%, or even lower. The last time the US unemployment rate was seen at 3.4% was in 1969.
▶️ A strong labour market will strengthen the USD on ability to inspire new buying on speculation that the Fed will be more active in raising rates in subsequent meetings.
📅Stay up to date with market news in our Economic Calendar.
⚠️ Prepare for USD volatility! 💵
👉Register https://bit.ly/3n8rYtz & Trade thousands of #CFDs with FxPro.com
🔜It's jobs day today, and the US employment data for April will be released later at 12:30 GMT. Forecasts suggest that the economy created 390k jobs for the month, slightly worse than the 431k a month earlier.
This is almost double the long-term trend growth in employment (around 200k a month), which continues to push down the unemployment rate. It is expected to fall to 3.5%, or even lower. The last time the US unemployment rate was seen at 3.4% was in 1969.
▶️ A strong labour market will strengthen the USD on ability to inspire new buying on speculation that the Fed will be more active in raising rates in subsequent meetings.
📅Stay up to date with market news in our Economic Calendar.
⚠️ Prepare for USD volatility! 💵
👉Register https://bit.ly/3n8rYtz & Trade thousands of #CFDs with FxPro.com
US Jobs Report: sticking to the trend
In April, the US labour market maintained its impressive growth rate with 428K new jobs. This is higher than the expected 390K and in line with the increase a month earlier.
The current employment rate was 1.2 million below its peak in February 2020 and fully reflected the state of full employment. The unemployment rate is at 3.6%, the same as a month earlier, and only 0.1 points below the ‘bottom’ before the pandemic hit.
Average hourly earnings are up 0.3% for the month and 5.5% by April 2021. This is a high rate from a historical perspective, but it does not allow it to overtake the 8.5% price increase.
In April, the US labour market maintained its impressive growth rate with 428K new jobs. This is higher than the expected 390K and in line with the increase a month earlier.
The current employment rate was 1.2 million below its peak in February 2020 and fully reflected the state of full employment. The unemployment rate is at 3.6%, the same as a month earlier, and only 0.1 points below the ‘bottom’ before the pandemic hit.
Average hourly earnings are up 0.3% for the month and 5.5% by April 2021. This is a high rate from a historical perspective, but it does not allow it to overtake the 8.5% price increase.
The new data is an additional reason for the Fed to stick with its policy tightening course to bring down inflation as the labour market is not showing any signs of cooling so far.
On the other hand, wage growth has stabilised and is no longer likely to push prices upwards on a broad front. Furthermore, it is also challenging to find data in the current employment report that would unambiguously cause the Fed to speed up its monetary tightening.
The balance of signals holds back fluctuations in the stock and currency markets but seems to leave them within an established trend of a stronger dollar and a weaker stock market.
📣Trade responsibly at fxpro.com
On the other hand, wage growth has stabilised and is no longer likely to push prices upwards on a broad front. Furthermore, it is also challenging to find data in the current employment report that would unambiguously cause the Fed to speed up its monetary tightening.
The balance of signals holds back fluctuations in the stock and currency markets but seems to leave them within an established trend of a stronger dollar and a weaker stock market.
📣Trade responsibly at fxpro.com
Bitcoin will fall until the bulls capitulate
Bitcoin is trading near $33.5K on Monday morning, declining for the fifth consecutive day. Over the past 24 hours, losses are 2.3%, and are approaching 14% over the past seven days. Ether loses 3.5% in 24 hours and 14.3% for the week, settling near $2450. Altcoins from the top ten are down between 0.8% (XRP) and 4.3% (Cardano).
Total crypto market capitalisation, according to CoinMarketCap, is down 2.3% overnight to $1.54 trillion. More worryingly, volumes are rising along with falling prices. This situation points to an increasingly rapid exit from cryptocurrencies, even though the process takes place without sharp dips. We see an orderly exit – a sure sign that downward sentiment may prevail.
Bitcoin is trading near $33.5K on Monday morning, declining for the fifth consecutive day. Over the past 24 hours, losses are 2.3%, and are approaching 14% over the past seven days. Ether loses 3.5% in 24 hours and 14.3% for the week, settling near $2450. Altcoins from the top ten are down between 0.8% (XRP) and 4.3% (Cardano).
Total crypto market capitalisation, according to CoinMarketCap, is down 2.3% overnight to $1.54 trillion. More worryingly, volumes are rising along with falling prices. This situation points to an increasingly rapid exit from cryptocurrencies, even though the process takes place without sharp dips. We see an orderly exit – a sure sign that downward sentiment may prevail.
👍1
The optimists, however, have something to hang on to. The Cryptocurrency Fear and Greed Index has collapsed to 11. Over the past year, the index has been at the current or lower level six times, and on each occasion, we have seen either consolidation or the start of a rally and a rebound.
In March 2020, when the index similarly reached single digits, we saw an influx of long-term buyers.
The current extreme fear may attract buyers who have been waiting for extreme oversold conditions to buy cryptocurrencies long term.
However, we note that the amplitude of crypto market fluctuations does not resemble either a capitulation of enthusiasts or a wave of stop orders triggering.
Typically, a trend reversal is preceded by a sharp increase in momentum with the eventual resignation of those who stood against the trend. In our case with Bitcoin, this could translate into a sharp acceleration of the sell-off after falling below $30K,
📣Trade responsibly at fxpro.com
In March 2020, when the index similarly reached single digits, we saw an influx of long-term buyers.
The current extreme fear may attract buyers who have been waiting for extreme oversold conditions to buy cryptocurrencies long term.
However, we note that the amplitude of crypto market fluctuations does not resemble either a capitulation of enthusiasts or a wave of stop orders triggering.
Typically, a trend reversal is preceded by a sharp increase in momentum with the eventual resignation of those who stood against the trend. In our case with Bitcoin, this could translate into a sharp acceleration of the sell-off after falling below $30K,
📣Trade responsibly at fxpro.com
👍1
#WaveAnalysis #STAN
Standard Chartered reversed from resistance zone
• Likely to fall to support level 5.510
Standard Chartered earlier reversed down from the resistance zone lying between the multi-month resistance level 5.8 (which stopped the sharp uptrend in February) and the upper daily Bollinger Band.
The downward reversal from this resistance zone stopped the earlier impulse wave 3 of the impulse wave (3) from March.
Given the overbought daily Stochastic – Standard Chartered bank can be expected to fall further toward the next support level 5.510.
📣Trade responsibly at fxpro.com
Standard Chartered reversed from resistance zone
• Likely to fall to support level 5.510
Standard Chartered earlier reversed down from the resistance zone lying between the multi-month resistance level 5.8 (which stopped the sharp uptrend in February) and the upper daily Bollinger Band.
The downward reversal from this resistance zone stopped the earlier impulse wave 3 of the impulse wave (3) from March.
Given the overbought daily Stochastic – Standard Chartered bank can be expected to fall further toward the next support level 5.510.
📣Trade responsibly at fxpro.com
🔥2