2022/05/03 (038) 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?

What Will The Federal Reserve Bank Doing?

“The US Federal Reserve is poised to begin aggressive rate hikes as China and the EU slow down“, said Stephen Innes, managing director at asset manager SPI. It is considered a foregone conclusion that there will be a 50 basis point hike in interest rates. It would be the biggest interest rate hike since 2000. Much more important than the actual decision, however, will be the pace at which further interest rate hikes will occur and whether, from the markets’ point of view, that the Fed may be stalling the economy with an aggressive interest rate policy. These fears of interest rates and recession have been weighing on the world’s stock exchanges for a while and repeatedly lead to uncertainty and strong fluctuations. Investors are also worried about the rigid corona lockdowns in China, which are weighing on the local economy and contributing to the currently difficult investment environment.

After the Federal Reserve’s latest statements, investors assume that the US Federal Reserve will raise interest rates by 50 basis points on Wednesday in view of an overheated job market and an inflation rate of 8.5 percent in the USA. Fed Chairman Jerome Powell (69) said at the International Monetary Fund’s spring meeting just over a week ago: “I would say 50 basis points will be on the table for the May meeting.”

“With a view to Wednesday, the question is now what pace Powell will signal for the subsequent interest rate hikes”, said Jens Franck, chief portfolio manager at asset manager NordIX. Stockbrokers expect the Fed to raise interest rates to between 2.75 and 3.0 percent by the end of the year. Individual market participants even expect 3.5 percent.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 stockmarket (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?

USD INDEX Set For Strong Monthly Performance

The dollar index eased to around 103.1 on Friday after hitting a 19-year high in the previous session, but is still up about 5% in April and on track for its best monthly performance in nearly a decade. The greenback was lifted by bets on faster US interest rate hikes and worries about growth in Europe and China. The dollar climbed each week in April, and has particularly outperformed against the Japanese yen which sank to 20-year lows as the Bank of Japan reinforced a commitment to its super-low yield policy. Meanwhile, the Federal Reserve is expected to deliver a hefty 50 basis point rate hike at next week’s policy meeting in response to soaring inflation, to be followed by equivalent rate increases in the next two meetings. Weaker-than-expected quarterly US growth data on Thursday also proved little obstacle to the dollar’s rise, and investors hardly adjusted their near-term interest rate bets.Ahead Of Fed Decision USD INDEX Holds Up

The dollar index firmed up around 103.5 on Tuesday, holding just below a 20-year high ahead of an expected Federal Reserve rate hike this week, with traders watching for an even more hawkish tone than many expect from the central bank. The Fed is expected to hike rates by a hefty 50 basis points and announce plans to reduce its $9 trillion balance sheet when it concludes its two-day meeting on Wednesday.

Comments by Fed Chair Jerome Powell after the meeting will also be scrutinized for any new indications on whether the Fed will continue to hike rates to battle rising price pressures even if the economy weakens. Meanwhile, weaker-than-expected quarterly US growth data on Thursday proved little obstacle to the dollar’s rise, and investors hardly adjusted their near-term interest rate bets. Fears of an economic slowdown in Europe and China also drove safe haven flows into the dollar.