Big day for US markets as the FED meets up – Market Analysis – July 29

Big day for US markets as the FED meets up – Market Analysis – July 29

Jerome Powell holds the key to indefinite and infinite flooding of the market to keep the US economy afloat

The market remains stalled, waiting for important decisions that may lead the way soon.

Today's meeting of the Federal Reserve does not raise too many expectations. Most likely, the Fed will not make any decision that involves a change in its current monetary policy.

The stimulus package implemented through the asset purchase program will be extended until the end of the year.

At least, as they already announced in today's statement, Powell will express his determination to maintain this expansionary policy for as long as necessary.

Only an increase in the emphasis of the discourse that may raise expectations in the market for future actions, such as an increase in the volume of asset purchases or even more cuts in interest rates, would cause an acceleration in current market movements, that is, more significant weakness of the Dollar and further falls in the yields of treasuries, but this is not expected.

What is more likely is that the bias of his assessment of the economic situation is more dovish, especially if we take into account the latest financial figures of the labor market, in which high numbers of jobless claims remain.

The one published yesterday Consumer Confidence, which suffered a setback compared to the previous month, mainly due to the increase in cases of contagion throughout the country.

New Stimulus Package

More critical and decisive for the market will be the development of the negotiations in the North American House of Representatives of the planned fiscal stimulus package with more than 3 trillion Dollars.

At the moment, it is not expected that the proposal of the GOP, Republican Party, will be approved by the Democratic representatives. Therefore, the process can be extended even more in time.

Partial agreements have been reached whereby partial amounts will be released as negotiations continue. This process will undoubtedly be the main factor that will attract the market's attention in the coming weeks. Any significant advance will be seen as positive by investors and will serve to pull equity markets out of the sideways fluctuation zone they are in right now.

According to the opinion of most market participants, the downtrend of the US Dollar remains intact with quite a downward trend.

DollarIndex, having broken down support at 95.70, is at an intermediate support level that coincides with the low reached in September 2018 at 93.50. Underneath it has a clear path, from a technical perspective, up to 89.50.


One of the pairs that best reflects this weakness of the US Dollar is AUD/USD.

The Australian currency is already above the levels before the emergence of the crisis, among other reasons driven by the rapid recovery of the price of the main commodities, but largely due to the intrinsic weakness of the Dollar, which would lead the pair to a next target in the 0.7390-0.7400 zone.

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