Data from last week indicated that the inflation rate is finally cooling off which led to the market expecting a 50 bps rate hike in December instead of an expected 75 bps hike. We saw a massive dollar selloff throughout the market; Stocks, Gold, Euro, British Pound, and crypto were bullish as cash flowed out of the dollar and risk-off assets into risk-on assets.
At the moment, the market is waiting for Fed chair Jerome Powell’s speech at the Fed meeting this week to consider the direction they will take in December. Here are the assets we’ll be looking into in today’s DIFX Analytics:
Bitcoin may move toward $24k
Bitcoin has broken the triangle that had previously been trending downwards, a bullish signal for the asset. This could also be due to the selloff we saw in the Dollar the previous week which led to bullish movements in Tech stocks, as well as the entire crypto market.
If the Feds narrative becomes less hawkish and the market continues to price in a 50 basis point rate hike in December, then we can expect bullish price action in Bitcoin with moves toward the resistance at $24000.
The Yen is still on the rise
Last week, was mostly bullish for USD/JPY as the Dollar selloff pressed on. The last time the Bank of Japan moved forward with its “Sell the Dollar-Buy the Yen” strategy, it took a total of only 18 days for the pair to set a new high. USD/JPY has been trading around $145 and $149 since the BoJ intervention.
As we’re awaiting a speech from the Fed Chair, a less aggressive stance can help the Yen as a more hawkish than expected stance could push the asset above $152, making any intervention from BoJ less effective.
A strong dollar is keeping gold down
Gold has been heavily influenced by the strengthening of the US dollar due to the increasing opportunity cost of holding non-yielding bullion. The asset is sitting on the support line at $1640 and we have 4 key levels in the short term for Gold.
Powell’s speech this week would certainly have an effect on the direction price action will move toward. If the Fed’s stance remains very hawkish then we can expect a selloff to $1600 levels in the asset otherwise, we may see Gold make a move for $1700.
Euro is still struggling
EUR/USD has been stuck in a downside trend for the entire year with frequent rebounds off the 50-day EMA on the Daily chart. Last week we saw price action break this trend line for the first time, a signal for a potential reversal.
The reason behind this is due to the market pricing in a 50-basis point rate hike in December as opposed to the initial 75-basis point rate hike. This sparked off a narrative in the market that the Fed will be pivoting sooner than expected.
Traders have to consider Jerome Powell’s speech this week to determine whether the Fed’s stance has become less hawkish to decide their next move.
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