2022/05/05 (040) 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?

Dollar Weakens As Fed Nixes Hawkish Hopes

The dollar index traded around 102.5 on Thursday after falling nearly 1% in the previous session, as the Federal Reserve raised interest rates by a widely expected half-percentage point but nixed expectations for even larger rate hikes ahead. The central bank increased its benchmark interest rate by 50 basis points, the largest since 2000, and Fed Chair Jerome Powell said that similar moves were on the table for June and July. Meanwhile, he clarified that the Fed is “not actively considering” a larger, 75 basis point rate hike. The dollar depreciated the most against antipodean currencies after the Fed announcement as investors dialed back bets on outsized US interest rate hikes. Investors also assessed economic risks stemming from the Fed’s battle against surging inflation, denting haven demand for the greenback.

US Bond Selloff Resumes

The yield on the 10-year US Treasury note, which sets the tone for corporate and household borrowing costs worldwide, jumped towards 3.1%, a level not seen since November 2018, as investors digest the narrative of a looming policy tightening cycle against a backdrop of slowing global growth. The Federal Reserve hiked its benchmark policy rate by half a percentage point for the first time since 2000, sending a strong signal that it intended to do so again at the next two meetings. With inflation running at 40-year highs and the job market extremely tight, the Federal Reserve had no choice but to change the narrative and signal a faster tightening.

Dollar Index Hits 19-Year High

The dollar index rose to as high as 103.939 on Thursday, the highest since December 2002 after falling nearly 1% in the previous session, amid Fed’s increasingly aggressive approach to monetary policy as it tackles inflation that is soaring at its fastest pace in 40 year and investors bet on even bigger interest rate hikes going forward. The Federal Reserve increased its benchmark interest rate by 50 basis points, the largest since 2000, and Fed Chair Jerome Powell said that similar moves were on the table for June and July. Meanwhile, he clarified that the Fed is “not actively considering” a larger 75 basis point rate hike, although it did little to ease investor expectations of bigger interest rate hikes this year.

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?

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