June 16, 2021 13:53:48
It seems the hawks are ruling the roost pre-FOMC with expectations for Chair Powell and the updated dot plot propelling the dollar higher gaining more airspace on the wires. But consensus may be closer to the outcome this time around with tweaks to the statement and projections cognisant of higher inflation but no major changes in the policy outlook. Talk about talking about tapering is being demanded, but disappointing jobs figures may constrain the Fed from declaring major progress towards taper and its objectives.
Gold rolling over?
Gold has been trading with a soft undertone recently printing a lower high and lower low on the daily chart, with the dollar finding support. The 2.5% fall this month has been due to the relative resilience of real yields which have refused to fall deeper into negative territory.
If the dollar rises due to a more hawkish Fed, gold will challenge first support at this week’s low at $1844 before major support at the 200-day SMA at $1839. The Fib level of the rally form the April low comes in below here at $1825. Any bid in gold if the dollar declines will need to get above $1878 ahead of the psychological $1900 mark.
Nasdaq at highs
The Nasdaq has been on more of a rollercoaster ride than the other major US stock indices as essentially, it is laden with growth and tech companies who are more interest-rate sensitive. These firms did not react well to the mini-taper tantrum we’ve seen already up to April when market rates rose sharply and 10-year bond yields touched 1.77%. However, since then the index has risen strongly with new highs made yesterday as rates have fallen.
Much now depends on tonight’s Fed message and whether we see bond yields and the dollar rise, perhaps due to a change in the dot plot bringing forward rate hikes, which would dampen performance of the Nasdaq. Previous cycle highs around 14068 are potentially robust resistance with the February high at 13879 the first level of support before the 50-day SMA that sits at 13705. Momentum is still clearly bullish however, which means any level of status quo and a patient Fed will see prices go north.
Although Moneta Markets aims to ensure that the information/material is accurate, it cannot be held responsible for any omissions/miscalculations or mistakes as it does not warrant the accuracy of such material. Any material and/or content provided herein is intended for educational purposes only and does not constitute investment advice on how clients should trade as it does not take into consideration your personal objectives, financial circumstances or needs. Please seek independent advice before making any trading decisions. Reliance on such material is solely at your own risk and Moneta Markets cannot be held responsible for any losses resulting directly or indirectly from such reliance. Any reference to figures/statistics or numbers refers to the group of companies of Moneta Markets. Please refer to the legeal documents should you require more information.
