Jerome Powell To The World: Kickeraboo!

  • Parts of the global economy will collapse if the Fed aggressively raises rates for vendetta. The impacts will be felt beyond its national jurisdiction. The global recession will, in turn, impact US economic growth. The world of unexpected repercussions will then suddenly become every US citizen’s focus.

  • The yields were 0.2% at this time last year; they are now 19 times greater. And this is all before the Fed begins its aggressive $95 billion/month quantitative tightening program. It truly hasn’t had time to evaluate the results of its brisk trekking. The dollar is the world’s reserve currency, like it or not. If cash dries up due to increased rates, everyone outside the US will be affected. 

  • US Dollar Index (DXY) is still in the lead at approximately 109.80 during Friday’s Asian session as Fed hawks maintain control, supported by positive US statistics. The concerns about China’s and Europe’s economies are another factor that supports the greenback’s index against the six most important currencies.

  • With significant rate increases expected in the next few months, the gold market remains sensitive in the face of the aggressive Fed narrative. Markets are now confident that higher rates will likely be in place for a longer period due to hotter than anticipated US inflation and an unexpected return in retail sales, supporting US currency and Treasury yields.
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EURUSD: Investors are preparing for further policy tightening measures on the Eurozone front. Policymakers of the European Central Bank (ECB) have acknowledged that the institution misjudged the inflation rate and is now struggling mightily to do so. As a result, stagflation worries have increased.

  • While investors wait for US Michigan CSI data, the EUR/USD fluctuates around 1.0000.
  • Positive US retail sales statistics will support the Fed’s decision to further tighten policy.
  • Ahead of the winter season, the energy issue in the Eurozone is becoming worse.

USDJPY: It should be noted that the Federal Open Market Committee (FOMC) meeting is the following week, and the market’s cautionary attitude in anticipation of it puts pressure on the USD/JPY pair’s near-term movements. However, Japanese Finance Minister Shunichi Suzuki warned, “if severe yen fluctuations persist, we will take required steps without excluding any possibilities.”

  • While recently ignored, USD/JPY is consolidating weekly gains around a two-decade high.
  • Demand from yen importers is strengthened by Tokyo’s three-day vacation.
  • Before the FOMC meeting next week, risk triggers and yields can keep traders entertained.

GBPUSD: Bulls and bears compete for control of GBP/USD as it hovers around 1.1460 in anticipation of Friday’s important UK/US data. The recent increase in the Bank of England’s (BOE) hawkish leaning and the greater probabilities of the Fed’s aggression may also be related to the Cable pair’s most recent inactivity.

  • The GBP/USD currency pair continues to trade downward near the recent weekly low.
  • Before data, sluggish yields and a short-term technical barrier test dollar bulls.
  • Amid record-high UK inflation forecasts, hawkish Fed bets collide with BOE worries.
  • Before the FOMC meeting next week, the UK Retail Sales for August and the Preliminary Michigan CSI will provide immediate guidance.
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S&P500: The most appropriate way to interpret the most recent decline in US bond yields is as a market sentiment consolidation ahead of the preliminary readings of the Michigan Consumer Sentiment Index (CSI), which are predicted to be 60 vs 58.2 before. However, despite stronger US data supporting the hawkish Fed bets amid recession worries, risk appetite is still low.

  • S&P 500 Futures are under pressure as US 10-year Treasury rates are near a weekly low.
  • Calendar-decorating preliminary numbers from the Michigan CSI for September will be crucial; the FOMC meeting next week.
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GOLD: At $1,688 at the time of publication, the price of gold is cheering a prolonged rebound off a seven-week-old rising support line while once more moving toward the 21-day EMA barrier at $1,730.

  • Following its nearly $30 breakdown on Thursday, the gold market is licking its wounds.
  • The US currency and rates surge to take advantage of major anticipation for a Fed rate hike.
  • With targets of $1,758 and $1,751, the path of least resistance for XAU/USD looks to be downward.

SILVER: The failure to surpass the 50-DMA barrier, now at $19.25 at the time of writing, may cause the brilliant metal’s most recent immobility. However, the positive MACD indications and stronger RSI (14) give the XAG/USD bulls a reason for optimism. However, a downward-sloping resistance line from June, located around $19.90, seems to be a tough nut for the bulls to break.

  • After rebounding off the 10-DMA, the price of silver has remained flat.
  • Under the declining resistance line from June, upward seems tricky but bullish MACD signs and stronger RSI keep buyers optimistic.
  • To test bears before the annual low, there are several supports.
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Watch Out This Week

  • On September 20, the Canadian year-to-year inflation report will come out alongside the US building permits . These two reports will have a huge impact on the currencies. And as for what to expect: A figure higher than anticipated should be viewed as good (bullish) for the USD, while a lower than anticipated should be viewed as unfavorable (bearish). The same goes for CAD as well.

  • The Day September 22, is almost like a D-day for the GBP and USD both currencies will get a high impact from these interest rates decision meetings. A statistic that is higher than anticipated should be viewed as good (bullish) for the pound, while a figure that is lower than anticipated should be viewed as negative (bearish). Same goes for USD as well. 

  • 23rd of September, the Global PMI report for EURO, GBP and USD will come out and that will have an impact on the following region’s currencies. And this will eventually shake up the major pairs markets. A figure that is higher than anticipated should be viewed as good (bullish) for the USD, while a figure that is lower than anticipated should be viewed as unfavorable (bearish). The same holds true for the other two currencies.
Abhi Sinha
Abhi Sinha

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