DIFX Analytics: a strong Dollar is pushing Gold down, Bitcoin is consolidating

The anticipation of a pivot in policy from the Fed during the FOMC Press Conference was met with choppy markets as traders initially saw the statement as less hawkish. However, Jerome Powell clarified later on that he would remain hawkish and may even increase the number of hikes in the long term. 

The statement which was released 30 minutes before the press conference had the phrase “Cumulative Tightening” which can be considered a less hawkish stance. This caused an instantaneous bearish move in the Dollar and upwards gains in other assets.

During the Q&A, however, Powell clarified that even though they may hike by smaller increments in the next meetings, they will continue tightening for a longer period of time and we should expect the terminal rate to increase. This is an overall more aggressive stance from the Fed and we saw bullish gains in the Dollar overnight.

In today’s DIFX Analytics, we’re going to look into the following assets:

Bitcoin is consolidating

Bitcoin saw upwards momentum during the initial phase of the Fed meeting as the statement was released. This was because of the phrase “Cumulative Tightening” which indicated a pivot from the Fed.

This narrative was shut down by Powell as he clearly stated that even though they may hike rates by smaller increments, they expect to continue hiking for a longer period of time. This is an overall hawkish stance from the Fed and caused the bullish movement to halt and a selloff began in the crypto market. The digital asset has consolidated during Asian trading after retracing from the losses it experienced after the FOMC Meeting.

The dollar may see gains before tightening happens

The Dollar Index has been above the Fib level which it had broken for the past week as a less hawkish stance was being priced in. The bulls have re-entered the market which has caused a selloff in other risk-on assets.

We can expect the Dollar to continue its trend to the upside as investors reassess their projections for the end of the year, going into Q1 2023. We may see new highs set for the DXY before tightening occurs.

A rising Dollar pushed Gold down

Gold broke to the downside after the FOMC meeting last night. The Fed has indicated that they may slow down in terms of the weight of the rate hikes. They also admitted to miscalculating how long they would need to continue the hike.

This caused an upside movement for the Dollar and a selloff in Gold. We can expect to see gold fall until it hits support.

Euro is experiencing a downtrend

EUR/USD has seen a downside move. The pair broke the trend that it had before the Fed meeting. This is a bearish signal as it had trended against this line for over a month.

We may now see some downside moves in the asset until the price hits $0.975. It seems like the long positions placed during the pivot discussions may now be closing which leaves room for a sell-off in the pair 


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Trading Disclaimer

DIFX shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee, or implication by DIFX that the forecast information will eventuate, that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses in particular if the conditions or assumptions used for the forecast or mentioned in the analysis do not eventuate as anticipated and the forecast is not realized.

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