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FOMC

US dollar and DXYThe US dollar still maintains some strength after the DXY recorded the last peak at 103.78, before the results of the Job Openings and Labor Turnover Survey (JOLTS) were released today. Also this week, the US dollar is awaiting many important indicators that affect its trading, starting from tomorrow, Wednesday The 1.4% decline in first-quarter GDP released last week may catch the eye of the FOMC with high inflation readings and waning positivity labor market data support prospects for a follow-up rate hike 104 to 104.70 a very possible target in the coming period and we may see more
CAPITALCOM:DXY
by Walid_Aboeldahab
FOMC Meeting: What to expect Let's cover the question everyone is asking and no one is answering. "What should we expect from the FOMC meeting?" Well, let me tell you.... The consensus floating around from the MSM is that we could raise 50 basis points. But other sources say 25 and yet other sources say 75. But the over-arching consensus is 50. No "prepare for absolute destruction" warnings have been issued, YET. The past FOMC meeting and the past 2 CPI meetings had these warnings issued by officials prior to the release, saying "I know you were expecting bad, but expect worse". I will be watching for those warnings tomorrow as tomorrow officially commences the meeting. But in terms of how will this affect the market? I looked back, tried to make sense out of rate hikes and the stock market and I actually couldn't. I tried to answer this question with statistics. Its unanswerable. It truly is. I am sorry, I know, your stats day trader has failed you :(. But its kind of similar situation between earnings releases and stock behaviour. It doesn't really make sense! But let me show you what I found in the data, but let me show you from a more qualitative perspective through the chart itself to help you make sense of it: 1994 - 2010 Between 1994 and 2010 there were 3 notable rate hikes. The % change is displayed in the red box (i.e. the % increase). We see that 1994 had about a 10% sell of. 2004 and 2010 had initial sell offs, followed by a plateau for the remainder of the year and then a bull run towards the end of the year which actually brought the stock up to positive growth and return. 2015 - 2016 I see the most parallels currently with 2015. At the time, 2015 marked historic rate hikes for SPY at +233% change. This led to a 15% sell off, followed by stagnation, followed by a bull run at the end of the year. In 2016, there was a sell-off at the beginning of the year, followed by sustained growth of roughly 25%. However, in 2016, there was also an increase of +165%, but the stock market managed to continue to see growth. Currently Records made on SPY here. So far we are sitting at roughly a 15% sell off from beginning of year highs (Which happen to also be ATHs). So far, we are on track with 2015. So, is it possible that we stagnate and then recover end of year? Yes! It is actually. Am I advocating that this will happen? I am not sure. Many will say, "absolutely" and others will say "no way!" I don't know, I can't know, and I doubt anyone knows. I am not going to lie and bet my credibility on this, because I don't know. SPY has been normalizing just fine. We have almost completed a regression to the mean. If SPY decided to be bullish suddenly, then, mathematically its acceptable. Truly, it is acceptable. Do I think it will happen? I personally don't. But I personally don't know what to expect because these are really weird and unique times. Also, we had an historic rate hikes last FOMC meeting, SPY sold off dramatically, then IMMEDIATELY reclaimed its high and beyond. Like it was nothing! Don't forget that. Really, this is still fresh in my mind. It was insane! IT WAS INSANE! Let me just refresh your memory with the March 16th release: Insane. Either way, its a hard call. There is no rhyme or reason to how the stock market reacts to rate hikes. Perhaps we enter a place of stagnation and just chill out for some time. Perhaps we drop down into the 350s. I don't know. But this is why I am full fledge day trader in this market (whereas in 2021 I did both swing and day). Because I can admit I don't have any idea what is going on, and I only need to know my conditionals, my probabilities and my bullish and bearish breaks to play intra-day. So far my time series models have been holding out more long term, but we are at that pivotal junction in time where, once we regress to the mean, the question is, do we start entering bear market territory? Which is a fall below the mean and negative growth. I guess time will tell. As of right now, SPY can fall down to about 380s and still not be in negative growth. We would still be trading well within a normal predicted range. Albeit, lower normal, but right now SPY is on the extreme higher end of normal, so equally acceptable. A drop below 380 would be considered negative growth, from a math/stats point of view. I know people are saying "a break of 400 and its a bear market, its going to drop hard, etc." I don't personally see it that way because SPY would still be trading at an expected rate of growth until it passes below 370 - 380 range. But again, I am not an economist or finance guy. Just a statistics person. What about tomorrow? So, I think we need a bounce. SPY is trading roughly -1.66 SDs away from its mean. I expect this to return to some normalcy to give it room to sell off more if it so chooses, or to gap up more. As it stands right now, from math/technical side, SPY is not poised to sell off very well. Its still very much oversold. I would like to see some more selling, so I would like to see a bit more of a bonce to better position SPY to achieve this. As of right now, I would NOT bet on a dramatic sell off with FOMC results, because its just so oversold. If we get a bit of a bounce today, I would feel more confident about a sell off. An ideal close price for SPY is truly at least 418 . This would bring SPY up to about -1.45 SDs away from its mean. IDEAL situation is 425 which will bring it to about -1 away from its mean. My calculated bullish break from tomorrow is 418. I would like to see SPY break over that. It seems promising that we may even see SPY gap up tomorrow morning. that would be great! If we gap up over 418, I would be comfortable longing this. (I did long it today actually from 406, but sold before market closed). That's it! Another lengthy and wordy post. SIDE NOTE: I did a tutorial on calculating probability with stocks. I actually have another tutorial idea, how to calculate bounce prices like I just did in this post (i.e. when the stock is oversold or overbought, how to calculate a realistic target price based on how far away from its mean it is). If this is something that is of interest to you, let me know! Trade safe everyone!
AMEX:SPY
by Steversteves
55
Euro struggles at 5-year lowsEUR/USD suffered a dismal week, plunging 2.33%. The euro broke below the 1.05 line on Thursday but has managed to recover. The ECB doesn't meet until June, but policy makers will be closely monitoring eurozone inflation, which continues to climb. It was only a few months ago that ECB President Lagarde was dismissive about rising inflation, saying that it was a transient development (readers will recall the exact same stance from Fed Chair Powell). We certainly won't be hearing the 'T" word anymore with regard to eurozone inflation, which hit a massive 7.5% in April. The ECB may not stay in sync with the pace of tightening by the Fed and other major central banks, but the ECB is signalling that the issue is not whether to hike, but when and by how much. There are hawkish voices within the ECB calling for a June hike, but September could be the month to circle in the calendar, which will give policy makers additional data to review before making any moves. In the case of the Fed, tighter rates are a given, with spiralling inflation, a tight labor market and robust growth. It's a trickier scenario for the ECB, as eurozone growth has not been as strong and the Ukraine war and Russian sanctions have dampened economic growth. There are concerns about stagflation, and these risks will rise as the ECB raises rates. We can expect the ECB to tighten policy in the coming months, but at a much slower pace than the Fed. The FOMC meets on Wednesday and a half-point hike from the Fed is practically a done deal. This will be a significant move, as the Fed hasn't delivered such a large rate increase in 20 years. The Fed has hinted at additional half-point rates in June and July, and some analysts are even predicting super-supersize hikes of 0.75%, which hasn't happened since 1994. The Fed is in full throttle trying to catch up to the inflation curve, and this widening of the US/Europe rate differential could push the euro to 1.03 and perhaps even to parity in the coming months. There is resistance at 1.0612 and 1.0699 1.0408 is providing support, followed by 1.0321
by OANDA
1
Bitcoin Pivotal Week AheadBTC has followed a descending parallel channel since Nov 2021 ATH shedding >52% in late Jan to.$32.9k. Since the low, BTC rallied to a local high of $48k in late March before resuming the gradual mark-down. Currently sitting >40% from ATH @ $38.8k. Bitcoin Weekly Chart currently above 100 EMA while the 20 EMA has crossed below the 50. Previous FOMC in early March following 25 bps hike, the market rallies in the face of a "hawkish sounding" Federal Reserve... casting doubt on the seriousness of reining in rampant inflation that's achieved highest levels in >40 years w/ no sign of slowing. Critical juncture in price action, as BTC will likely put in a red daily candle Monday 5/2 and look for direction from the broader markets over May 3rd & 4th. Potential for market upswing following the Fed's decisions is possible and would fall in line with March market response to Fed's seemingly hollow words. The more like scenario is market realization that inflation is problematic and Fed's efforts to reduce central bank balance sheets via quantitative tightening has teeth and will continue the gradual market corrections we've seen in Q1. Macro factors are indicating headwinds continue as GDP in Q1 was down, labor remains incredibly tight, prices remain unsustainably high. Bitcoin likely to creep down to $35k range as the market considers Fed actions and decides on a direction.
COINBASE:BTCUSD
by R0MM3LL
Backtesting the FOMC meetings: are the rate hikes priced in?I’m going to profit off of the fact that next Tuesday (May 3rd) the Federal Open Market Committee (FOMC) main meeting will take place to backtest how this event affects the markets (focusing on Bitcoin but in the end all the markets are connected). Firstly, I’m going to talk about what I expect Jerome Powell to say in the upcoming meeting, and then I’ll explain how they affect price. Lastly, I’ll estimate some technical targets. Meeting expectations So briefly, the results of the last CPI were 7.5% year over year (YoY) inflation, not above nor below the expectations. The jobs report that came out on March 31st showed signs of rising wages and a decrease in unemployment. As these events are already priced in as they happened weeks ago, the approach I want to take on this data is that the Fed wants to keep their position, not too dovish but not too hawkish, as the expectations are being met. The thing that the Fed has looked more at is the current conflict in Ukraine, which affected supply chains but, surprisingly, didn’t reduce consumer demand. And this means that they will have to start being more aggressive on the next rate hikes, announcing 50 basis points (bps) in the next two meetings. Regarding this unpredictable situation, if they keep the same position (which I see likely), they would want to return to 25 bps hikes as soon as they can. The market reaction With all that said, the Fed is likely to maintain their ideas, so I’ll dive into the backtesting part of the article. If we take the distance between every meeting since January 2021 and the next swing high/low (in percentages), and do an average excluding the outliers, we get around 8% move to the upside after every meeting. Note that this is usually driven by momentum, and the market reaction in the long-term may be totally different (as we see in November and December). However, the Fed has changed (and thus the market reactions) since they said inflation is no ‘longer’ transitory. The odds of a recession started to get higher and the fear kicked in. Then, in January, I think the price reacted positively as the Federal Reserve showed that they might not turn hawkish. And the same happened in the last meeting, when everyone feared the consequences of the war. Nothing can change now: we have a catalyst (the Fed announcing they’re going to hike 50 bps instead of 25), markets have trended down before the meeting and technical analysis, though especially on-chain analysis are still showing bullish signs. Targets based on technical analysis Before anything, I’m still confident we have to take the liquidity below $37k, which I expect to see at the start of the week, before the FOMC. Usually liquidity taking action implies that there is going to be a bounce just after the price is reached, so this makes percent sense if we add the volatility that there should be during the meeting. In the next few days after it, I’d expect at least the high Bitcoin has set a few days ago at $40.4k to be taken, which is a 10% upside from $37k (close to the average move since 2021). If we end up going higher I’d expect the fair value gap (or FVG) at $45k to fill, which would represent a 22% move (similar to the last two meetings). Lastly, I’d expect the SPY to move similarly and try to consolidate somewhere around $440 as most earnings haven’t been bad, with the only big exception being Amazon.
BITSTAMP:BTCUSDLong
by config_json
Graph Protocol Relief RallyNear-term long positions are attractive, with reassessment necessary as inflation reporting in April approaches. Bullish continuation will be more risky in the days leading up to CPI/PPI reporting. Following Bitcoin and the broader markets, GRT will realize near-term bullish support as the markets have shrugged of the Fed's 25 bps rate hike. GRT will flip 20 EMA into support, then push through 100 EMA... ultimately testing 200 EMA until next round of economic reporting. Sharply rising prices are elected to continue as there's been no substantive change to monetary policy, QE continues, corporations continue elevated pace of stock buybacks. Inflation results for March (CPI & PPI) will be published by BLS on 4/12 & 4/13 with high likelihood of further increases from the lagging reporting. April reports will be a pivotal as the FOMC will not meet until early May with the April inflation results published a week after the Fed meeting. Current expectation is shockingly higher inflation with the Fed's hand being forced, either accept persistent inflation and risk a wage-price spiral or adjust approach with more hawkish action and less reliance on hollow words. Maintaining status quo until midterm elections is likely to become untenable, recession risk is increasing.
BINANCE:GRTUSD
by R0MM3LL
DXY: Bull Market is Approaching an Important Resistance Level The recent US interest rate hike and an “unexpected” dovish statement given by the ECB during the EU interest rate decision this month provided further bullish momentum for the DXY . However, no key levels are actually broken at the moment and DXY is still moving well within the yearly channel between the level of 89~90 and 102.50~104. DXY is currently approaching the yearly resistance level of 104.00. This is a key level to watch as it is the high back in 2017. For buy opportunities, we are waiting for some kind of a pullback first before entering buy positions. Also, a clear breakout of 104 level would also give us the green light to capture pullback at 104 level, but this is a risky buy setup as we do not want to get our positions stucked if a period of correction occurs. For sell opportunities, we are not currently looking for any sell entries because there are simply no bearish patterns being formed. We will consider sell entries once the market creates a lower low first. But we cannot foresee that yet in the near future.
TVC:DXYLong
by NicoBeau_Capital
BTC Vs FED FOMC Meeting"Elon Musk Buy Twitter" news work as fuel for Market. DOW Bounce near 600 point and bitcoin back to $40000+ after announcement. $42500 is major resistance for bitcoin and Market cant ignore FED FOMC meeting on May 4. Bears will like to play short near $42500. Daily closing above $42500 will create fresh momentum in market. If BTC hold $37k support till May 4 than it will be very good for Bitcoin market. BTC VS FED FOMC Meeting: FED FOMC meeting turn into one of the main trigger for Bitcoin. We can see in chart that BTC price slip before Fed Meeting, before going up again after. Same we saw from last 4 days. Twitter news has been pumping market but its good to eye on daily closing, But be ready for volatility, Market can give more opportunity before FED FOMC meeting
by sebastianjohansen
Timing is everything! While the general direction for the US Fed and the ECB are similar, their timelines differ greatly! On the US Fed (USD) front, we are days away from the next FOMC meeting (4th May 2022) where market participants are expecting a 50 bps hike. On the ECB (EUR) front, the ECB is expected to taper its asset purchase program by early Q3, before it will consider any rate hikes. The difference in timelines of the Fed and ECB could provide some interesting hints on where the EURUSD is heading in the short term. With the Dollar being the first mover here, we expect strength in the dollar to drive the EURUSD lower over the short term before the ECB firms up its hike schedule. The EURUSD pair is also trading just below the 7- year support level. Zooming in on a shorter timeframe, we also spot a breakout and retest at this level, suggesting the move has begun. Entry at 1.08070, stop above 1.12080. Targets are 1.06760 and 1.03835. Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios.
CME:6E1!Short
by inspirante