FX.co ★ 18.01.2022: USD growing in anticipation of Fed’s meeting (S&P500, DXY, USD/CAD, BTC/USD)

Hi everyone! On Monday, American trading floors were closed for the national holiday, Martin Luther King Day. So, futures on the stock indices were trading almost flat. Let’s see how Wall Street is trading today and check whether investors express bearish sentiment.

On Friday, the major US stock indices closed mixed. Analysts say that the US stock market is going through a downward correction. Futures on the S&P 500 closed with a 0.5% gain on Friday. However, the index fell by 0.5% to 4,662 in the early morning today. So, the US equity market is likely to open with a notable decline. Besides, the S&P 500 could extend its slide towards the lower border of the corridor between 4,620 and 4,660. The soaring inflation that stands at an annual 7% remains the fly in the ointment amid the steady economic recovery, the healthy labor market, GDP growth, and rising incomes. Interestingly, hundreds of American companies listed on stock exchanges have already slumped by over 20% from the highest levels of the last year for the first two weeks of the year.

According to the market rule for stocks and indices, a fall of more than 20% means that a downward correction has turned into the bear market.

This week, 35 top US companies, included in the S&P 500, are due to report on their financial records for the fourth quarter. Upbeat corporate reports could revive stock exchanges but hamper the US dollar’s ongoing recovery. Meanwhile, the greenback halted its decline, trading higher for 4 days in a row. Today its index climbed to 95.42. The expected corridor is seen between 95.00 and 95.60. The US dollar’s growth is propped up by rising yields of US Treasuries that have jumped to the strongest level in two years. Besides, expectations for the looming rate hike are also bullish for the US currency. One week is left before the policy meeting of the Federal Reserve. The market is anticipating clear signals from the regulator. Last year, Jerome Powell labeled the high inflation as temporary. However, it became a major headwind for the US economy and a headache for the President’s political party. Joe Biden’s rating has dropped to the lowest levels since his first days in the office. The interim Congressional election will be held this year and the Democrats are running a risk of losing the majority in the House of Representatives.

The USD/CAD pair is still trading lower on the back of the rally in the oil market despite the firmer greenback. Oil prices have already overcome the highs of 2018, heading for new peaks. So, the USD/CAD pair is likely to extend the decline. Currently, it is trading at nearly 1.2505. If the greenback continues its advance, the currency pair is expected to shift towards the upper border of the corridor between 1.2450 and 1.2550.

Bitcoin is again trading in the red after a brief climb above 44,000 last week. The flagship cryptocurrency is following a downtrend amid the cautious sentiment across financial markets and anticipation of the Fed’s policy decisions. Bitcoin is retreating towards local lows of the last week. It is now trading at about 41,703 dollars. Most analysts acknowledge the overall bearish trend in the digital token. Some analysts are warning that Bitcoin is about to form the death cross, the bearish technical pattern that suggests a protracted downtrend. Currently, the difference between a 50- and a 200-day moving averages is the mere 1,000 dollars. So, we are likely to see this pattern on charts in the coming days. In the meantime, the expected corridor for Bitcoin is defined between 41,500 and 42,500 dollars.

By and large, the US stock market is trading quietly. The bubble blown in 2021 is still enormous. Experts do not rule out a new wave of sell-offs. Thank you for watching! See you tomorrow!