On Wednesday, after the US Fed had unveiled its policy decisions, the stock market turned sour with all three benchmark indices going down. In fact, immediately after the Fed’s policy statements, the market fell sharply but won back half of the losses later. Hence, this decline is viewed rather as a retracement than a trend reversal. Why did the regulator’s policy decisions cause such a response? Let’s try to figure out. On the one hand, the central bank changed nothing in the ongoing monetary policy. At the same time, the Fed updated economic forecasts for 2022, 2023, and 2024. This is what triggered that particular response.
Now let’s discuss everything in detail!
The S&P500 shed 0.5% yesterday. Today the index is also trading lower at near 4,220. The S&P500 is expected to trade in the corridor of 4,180 to 4,260 until Friday. Analysts agree that the market is ready to develop a new bullish wave. Indeed, no unpleasant surprises happened yesterday.
The Federal Reserve sent a message that it was going to bring forward the first rate hike to 2023 from 2024. This rhetoric propelled a rally of the US dollar. In fact, the greenback has advanced the most since March 2021, having climbed to the levels of early May. Technically, it looks like a trend reversal. The US currency is likely to carry on with its advance in the nearest days or even weeks. Experts reckon its index is strong enough to leap to about 93.50, the levels of early April. Today the US dollar index is trading at around 91.40. It is expected to hold in the corridor of 91.20 to 92 points with the bullish outlook.
On Thursdays, traders take notice of a weekly update on unemployment claims in the US. This time, the actual data fell short of expectations. The number of first-time claims for unemployment benefits rose a bit higher than expected. This could subdue growth of the US dollar but for a short time.
In the USD/CAD pair, the greenback is certainly holding the upper hand. Yesterday, the currency pair traded at near 1.2280. It is likely to trade between 1.2200 and 1.2350 in the near time. Obviously, a further trajectory depends on the US dollar’s dynamic and trends in the oil market. Oil prices were unaffected by the Fed’s policy decisions. Now oil is drifting lower. Besides, in case the US dollar extends its bullish run, this could put pressure on oil prices. However, if oil prices manage to grow even on the back of the strong dollar, the USD/CAD pair will make a correctional decline.
When it comes to digital assets, the crypto market dipped following the Fed’s announcements. Bitcoin fell below the level of 39,000 dollars. The number one cryptocurrency is expected to trade in the narrow corridor of 38,500 to 39,100 dollars per token until Monday.
To sum up, the US stock market has to determine a further trajectory. The closing levels today and on Friday will shed light on trading sentiment at the end of this eventful and busy week. On the political front, most analysts share the viewpoint that the long-awaited meeting between Joe Biden and Vladimir Putin did not bear fruit. The parties did not make sensational statements and agreements. They just exchanged views on the world and their views were polar opposite as expected.
02:11 US INITIAL UNEMPLOYMENT CLAIMS