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Bullish Week as Powell Keeps Rate Hikes Open

  • Powell signals September fed options are open
  • BTC has started to fall below the support levels

Since the beginning of the year, the USD has been rising, primarily due to expectations that the FED will become more hawkish and raise interest rates since they have already done so numerous times since January. 

The most recent rate increases were quite substantial, totaling 0.75% or 75 bps (basis points), which helped push the USD higher.

But the likelihood of the FED slowing down has increased as the US economy slips into recession in Q1 and Q2, which is what caused the USD to decline last week and risk assets to rise.

But on Friday, we witnessed a turnaround as stock markets plunged, and the USD resumed its bullish trend in response to Powell’s speech and other FED members’ comments.

The market had a dovish slant prior to Powell due to the weak PCE inflation report. Bostic confirmed this, stating that it caused him to lean slightly more toward 50 bps in September.

But Powell was the one who put an end to it all. He used strong language in an 8-minute speech that he gave, using a tool he had never used before, to hold rates higher for longer and take “forceful” action. 

He stated that Sept was still unsure about clear signals as they awaited data.

The speech didn’t raise any major red flags when it advocated selling stocks and buying the dollar. The speech didn’t raise any major red flags when it advocated selling stocks and buying the dollar. 

It referred to the importance of keeping rates higher than easing at the first sign of economic weakness or a decline in inflation. Powell also emphasized that the Fed was willing to put up with economic discomfort.

In my opinion, the Fed lacks the credibility to maintain its hawkish stance if the economy weakens, but the market today strongly disagreed. The initial response grew exponentially, and the dollar bid barely budged a point as almost everything finished at the day’s extremes.

The moves contend that stocks were seeking a dovish signal from Powell but were unable to find one. 

Curiously though, Powell’s comments had little impact on the rates market. Bonds would have benefited from the flight to safety bid, but even in Fed funds futures, the pricing was largely unchanged. 

Bitcoin Price Plunges

Bitcoin’s price has failed to break through the $22,000 barrier. BTC has started to fall below the $21,200 and $21,000 support levels. Both the $20,000 price and the 100 hourly simple moving average decreased in value.

Price has reached a low of around $19,525 and is extending losses.

An impending resistance level on the upside is located close to $19,800. 

The first significant obstacle is situated at the $20,000 mark. It is very near the 23.6% Fib retracement level of the decline from the swing high of $21,875 to the low of $19,525 at this time.

Bitcoin needs to pass through the $20,000 resistance level to start a recovery wave. $20,700 may serve as the next significant resistance level. 

It is very close to where the decline from the swing high of $21,875 to the low of $19,525 is retraced by 50% on the Fibonacci scale. If there are any more gains, the price might reach the $21,000 resistance level.

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Author

  • Zahari Rangelov

    Zahari Rangelov is an experienced professional Forex trader and trading mentor with knowledge in technical and fundamental analysis, medium-term trading strategies, risk management and diversification. He has been involved in the foreign exchange markets since 2005, when he opened his first live account in 2007. Currently, Zahari is the Head of Sales & Business Development at TraderFactor's London branch. He provides lectures during webinars and seminars for traders on topics such as; Psychology of market participants’ moods, Investments & speculation with different financial instruments and Automated Expert Advisors & signal providers. Zahari’s success lies in his application of research-backed techniques and practices that have helped him become a successful forex trader, a mentor to many traders, and a respected authority figure within the trading community.

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