2022/05/01 (036) Technical Analysis

This Week Will Decide The Path For The USD Index
This Week, This Month May, Next Months June And August!
Will Interest Rates Be Raised 3 Times By 50 Basis Points, This Summer?

The Fed Press Conference On Wednesday Will Definitely Be The Most Important Event Of The Week

However, the trade balance of the USA (also on Wednesday) and the US labor market data (on Friday), to put it mildly, certainly have no influence on the interest rate decision by Jerome Powell and his men and women. The majority of futures traders in Chicago expect the FOMC to announce a 0.5 percent hike in the fed funds rate. So while the financial market is almost certain that the Fed will hike rates, there are numerous uncertainties, unanswered questions, regarding Powell’s subsequent press conference – after the published interest rate decision. In this the Chf of the FED should give valuable indications of what to expect in relation to US monetary policy in the coming months.

In that regard, it should be noted that the Barclays Bank provided its predictions on the possible content of Powell’s press conference and its potential impact, yesterday: “We expect that much of the discussion at the press conference will revolve around how quickly the committee is ready to raise interest rates to neutral levels. Markets now expect interest rates to rise 50 basis points at each meeting through September. We continue to expect hikes of 50 basis points in May and June, while the committee will slow the pace to 25 basis points per meeting from July if it sees signs of inflation slowing.”
Bank of America, for its part, stated yesterday in reference to the upcoming Fed decision this week: “The most interesting moment of the press conference will probably be his answer to a question about a possible 75 basis point hike.” Furthermore BoA added: “We believe he will read a carefully crafted response suggesting it is possible, but not likely.”So, in this context – USD index, interest rate decisions – let’s just look at the interest rate expectations of traders in Chicago. Which, of course, are no guarantee of an upcoming interest rate decision. But, for sure, they are a good leading indicator, although the Fed can also use them, if they see fit, as a counter-cyclical indicator in their decision-making process. If the men and women of the Fed decide that Chicago futures traders are, too optimistic or too pessimistic about the forthcoming interest rate decisions.

The Current FedWatchTool Of The CME
Target Rate Probabilities For The Next FED Meetings

075-100 by 98,7% on 05/04/2022 regular FED Meeting

150-175 by 90,3% on 06/15/2022 regular FED Meeting

200-225 by 84,3% on 07/27/2022 regular FED Meeting

225-250 by 46,6% on 09/21/2022 regular FED Meeting
250-275 by 45,5%

250-275 by 40,8% on 11/02/2022 regular FED Meeting
275-300 by 45,6%

275-300 by 41,0% on 12/14/2022 regular FED Meeting
300-325 by 44,0%

For The Upcoming Summer Of 2022, Let’s First Of All
Take Into Account The 3 Upcoming Regular Central Bank Meetings Of The FED

Notice that Chicago traders are clearly expecting the Fed to hike rates 50 basis points, 75 basis points, and 50 basis points over the next 3 meetings. And here lies the rabbit in the pepper, my readers – if I’m not mistaken. And this is exactly where we could see a difference, act on it, and hopefully make a profit. Personally, I consider 75 basis points for June 2022 to be extremely ambitious. But that is my personal opinion – and not relevant for future prices on the financial market. But rather the fact that the air, which the June 2022 interest rate decision, has definitely become thinner. Yes, even the falcons may have run out. What we need to consider for this week. If, contrary to expectations, the futures trader in Chicago, the FED, in June 2022 should raise interest rates “only by 50 basis points”, as also currently anticipated in July 2022. Then there is much more space for financial market price actions – both for the already bullishly overheated US yield curve, and also for the already bearishly overheated US stock market (especially our NASDAQ 100) – to breathe out briefly in the medium term, just for the upcoming summer of 2022. But that is a pure hypothesis, which first of all has to be proven in the further course of the week, in the coming week, months, in the summer of 2022! But on which it might be worth positioning?

Basically Technical Analysis In An Historical Context – Take Care Of Following Price Areas Below, My Bulls

103.82 points (monthly high from 01/2017)
103.65 points (monthly high of 12/2016)
100.51 points (monthly high of 12/2015)
100.39 points (monthly high of 03/2015)
That’s why I also raised the stop course, this DXY trading capability, to 100 USD. And not just to secure our accrued profits, but also because if we fall below 100 points, the historical long-term picture, in the course development so far, should cloud over again.

Trading above 100 points confirms the long-term sideways trend in the USD index that has been ongoing since March 2015. Conversely, prices of over 100 points not only technically signal a bullish breakout, but also historically confirm it. Rather, building on this, the air upwards, towards the north-east, even up to 120 points, is possible in the next 10 years.

But this is not relevant for this week. And i will write deeper about it, may be in the next days. Because this week is the FED decision-making on Wednesday talk in town for the market – for us financial market participants…