Market Analysis: Powell's Speech Weakens USD
Yesterday, the Federal Reserve published a unanimous decision to leave the base rate unchanged for the third time in a row, which coincided with the expectations of most market participants. At the conference that followed, Powell's rhetoric was not as harsh as before. According to him:
→ economic activity is slowing, but the labor market remains strong;
→ inflation is still high, the Fed is committed to achieving the 2% target;
→ rates may rise if the US economy grows above expectations;
→ during discussions within the Fed, the topic of lowering rates becomes more relevant.
As a result, the increasingly clear prospect of rate cuts weakened the dollar greatly:
→ increased currency price relative to USD. The pound rose in price from the important support of 1.25, which we wrote about yesterday.
→ gold rose in price, again rising above the psychological level of $2,000 per ounce, as we expected in the analysis of December 5;
→ US stock indices rose in price.
In particular, the Dow Jones index set a historical maximum, and the S&P 500 is close to it. The graph shows that:
→ the price of the S&P 500 forms an ascending channel (shown in blue). The bearish breakout at the end of October turned out to be false;
→ after yesterday’s events, the price rose to the upper half of the channel, indicating positive sentiment in the market;
→ if the trend continues, the price may reach the upper boundary of the channel — while setting a historical maximum;
→ the resistance at 4,600 has been confidently broken, in the future it can serve as support;
→ RSI is in the overbought zone – the highest this year on the daily time frame;
→ it is possible that after a stormy week the S&P 500 will cool down – that is, consolidate, with the probability of testing the level of 4,700.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
→ economic activity is slowing, but the labor market remains strong;
→ inflation is still high, the Fed is committed to achieving the 2% target;
→ rates may rise if the US economy grows above expectations;
→ during discussions within the Fed, the topic of lowering rates becomes more relevant.
As a result, the increasingly clear prospect of rate cuts weakened the dollar greatly:
→ increased currency price relative to USD. The pound rose in price from the important support of 1.25, which we wrote about yesterday.
→ gold rose in price, again rising above the psychological level of $2,000 per ounce, as we expected in the analysis of December 5;
→ US stock indices rose in price.
In particular, the Dow Jones index set a historical maximum, and the S&P 500 is close to it. The graph shows that:
→ the price of the S&P 500 forms an ascending channel (shown in blue). The bearish breakout at the end of October turned out to be false;
→ after yesterday’s events, the price rose to the upper half of the channel, indicating positive sentiment in the market;
→ if the trend continues, the price may reach the upper boundary of the channel — while setting a historical maximum;
→ the resistance at 4,600 has been confidently broken, in the future it can serve as support;
→ RSI is in the overbought zone – the highest this year on the daily time frame;
→ it is possible that after a stormy week the S&P 500 will cool down – that is, consolidate, with the probability of testing the level of 4,700.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
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