On Tuesday, the US stock market tried to compete its correction. Following a nosedive in the last two days, the key stock indices regained nearly 1%. However, large investment firms took advantage and immediately entered the market with new short positions. As a result, the indices fell back to the opening levels and even lower. All in all, a downward correction is still unfolding in the US stock market in the run-up to the crucial event of the week and the month. The Federal Open Market Committee is due to make a policy statement.
The barometer of the stock market, the S&P 500 index, closed yesterday almost flat with a 0.1% downtick. Today futures on the S&P 500 rose roughly 0.5%. Meanwhile, the index is trading at about 4,354. The expected corridor is between 4,320 and 4,380. Investors are focused on any clues from the US Fed on the timing of stimulus tapering.
The question is open whether the US dollar will benefit the Fed’s policy decisions. In theory, this could be bullish for the greenback. In practice, it is hardly possible to predict accurately market sentiment. Some analysts believe that the US Fed will again refrain from unveiling the timeline for scaling back bond purchases. Thus, the US dollar index is set to trade in a tight range of 92.90 to 93.50 until the Fed’s announcements. For the time being, the index is trading at near 93.20.
The USD/CAD pair also depends on policy decisions of the US central bank. The pair is still trading sideways at about 1.2780 between the borders of 1.2700 and 1.2880. If the US dollar retreats following the Fed’s statement, the loonie is set to strengthen amid high oil prices. By the way, crude oil is extending its uptrend on the back of dwindling oil inventories in the US and limited supplies which are lagging behind growing demand.
The crypto market is still under selling pressure. Bitcoin price aims to test the key support of 40,000 dollars that will arouse a response from buyers. Currently, traders are increasing long positions. According to the chart, Bitcoin is trading lower that could be disrupted by a fake bullish breakout. Then, the crypto might develop strong bearish momentum. Meanwhile, the flagship cryptocurrency is trading at near 44,770 dollars. It should move a bit downwards to reach the projected target of 40,000 dollars.
Today, the Federal Reserve is going to release its policy decisions and updated macroeconomic forecasts. The regulator is facing a dilemma: on the one hand, dismal statistics on the employment for August and, on the other hand, soaring inflation. At the same time, US lawmakers have to deal with a nonstop saga about the enormous federal debt that has reached a ceiling. The US public debt has been swelling for a few decades.
The law reads that the government is obliged to obtain permission from Congress to raise the debt limit. Yesterday, with a narrow margin Congress extended the government funding until December 3 and removed restrictions on the debt limit until mid-December 2022. In other words, the US debt crisis has been settled again.