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

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
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.

 

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.