Jump to content

FOMC Hikes Rates 25 bps As Expected, Leaves Open Further Hike Expectations

Recommended Posts

Retail traders sell Wall Street, rising wedge in focus | IG South Africa

Feb 1, 2023 | DailyFX
John Kicklighter, Contributor

FOMC, Dollar, S&P 500, ECB and BOE Rate Decision Talking Points:

  • The Federal Reserve hiked its benchmark rate 25bps to a range of 4.50 – 4.75 percent
  • The US benchmark is higher than its principal global counterparts, but that advantage has been previously priced in
  • In the policy statement that accompanied the decision, the group said ‘anticipates that ongoing increases…will be appropriate’


The Federal Open Market Committee (FOMC) announced a 25 basis point increase in its benchmark rate range to 4.50 – 4.75 percent. The increase was a further step down in pace from the 50 bp increase in December and the 75 bp hike in November – following a stretch of four consecutive such heavy hikes. The increase in the benchmark rate was in-line with the consensus forecast from economists and the market itself via Fed Fund futures, so it was perhaps not a surprise that the initial market response centered on volatility without a clear view on direction.

With the market’s looking for clues to the Federal Reserve’s ultimate top for its benchmark lending rate, the monetary policy report offered some conflicting signals. On the one hand, the group mentioned that inflation had ‘eased somewhat but remains elevated’ – removing the references to volatile energy and food components. The maintenance of the remark that the group “anticipates that ongoing increases in the target range will be appropriate in order to…return inflation to 2 percent” is an unexpected hawkish perspective.

Some of the highlights from Fed Chairman Jerome Powell’s press conference following the rate decision include:

Hawkish Overtone

  • The discussion is around ‘a couple more rate hikes to get to appropriately restrictive stance’
  • FOMC will make decision on a meeting-by-meeting basis
  • Full effects of the rapid tightening cycle has yet to be fully felt
  • Suggests they are discussing a couple hikes to get to more restrictive stance
  • Taking pauses between meetings was not discussed
  • If the economy performs as expected, doesn’t expect a rate cut in 2023

Dovish Overtone

  • Says the Fed will need to stay restrictive for some time
  • Will need more evidence of inflation pressures weakening to be confident it is under control
  • Will likely need to maintain a restrictive policy stance for some time
  • Encouraging to see the ‘deflationary process has started’


FOMC Scenario Table



Table Made by John Kicklighter


Looking to the intraday chart of the active S&P 500 emini futures contract, the initial response to the FOMC hike was a drop which aligns to risk aversion that tends to draw on the market’s speculative connection to monetary policy as a backstop for risk exposure. However, that decline was sharply reversed without hitting any critical technical levels as investors looking for greater clarification on the path forward. Ultimately, through both hawkish and dovish remarks from the head of the Federal Reserve, the equity market drew upon the more supportive remarks pushing the S&P 500 to its highest levels since September above 4,100.


Chart of S&P 500 Emini Futures with Volume (5-Minute)



Chart Created on Tradingview Platform


With a connection to risk trends as a safe haven as well as its relative potential via yield differentials, the US Dollar would dive during Chairman Powell’s remarks. Ultimately, the US yield is a premium to most counterparts and the Greenback has reversed more than half of its run up through 2021-2022 – rooted heavily in the anticipation of that yield advantage – yet that doesn’t seem to be enough of a rebalancing for the US currency.


Chart of the DXY Dollar Index (5-Minute)



Chart Created on Tradingview Platform


While the Federal Reserve’s and market’s outlook for the terminal rate and the path through the end of 2023, the US benchmark is still seen to sport a premium in the rate differential against most its major counterparts – and specifically the most liquid counterparts. Fed Fund futures are pricing in a 4.90 percent rate through the June contract, which is a premium to the three largest counterparts: ECB (3.17), the BOE (4.39) and of course the BOJ (0.11).


Table of Relative Monetary Policy Standing



Table Made by John Kicklighter


Taking a bigger picture look at monetary policy rates across the globe, it is important to remember where the Fed sits in the global spectrum. It is a leader of an exceptional tightening regime that has thus far had a fairly measured impact on the financial market: below represented by the S&P 500. If the tighter conditions lead to a recession, the second round effect on investor confidence should not be missed as a by-product of monetary policy.


Table of Relative Monetary Policy Standing



Table Made by John Kicklighter

Link to comment

Dollar and VIX Slump After Fed Hike, Watch EURUSD and Doubt Trends


The Federal Reserve hiked its benchmark rate another 25 basis points and Powell held the door open for further hikes, but neither risk assets nor the Dollar took the group for its word. Scrutinize the progress on trends like that from EURUSD with event risk like the ECB and unresolved themes like recession ahead.





DailyFX and IG.jpg

Link to comment

Gold Prices Rallied as Markets Kept Betting Against the Fed, Now What?

Gold Prices Rallied as Markets Kept Betting Against the Fed, Now What?

Feb 2, 2023 | DailyFX
Daniel Dubrovsky, Contributor


  • Gold prices rallied the most in almost 2 weeks after the Fed
  • Markets continue to bet against Powell’s rate outlook vision
  • XAU/USD now turns to non-farm payrolls data on Friday


Gold prices gained 1.14 percent on Wednesday, the most in almost 2 weeks. The yellow metal is on course for a 7th consecutive week of gains. That would be the longest winning streak since the summer of 2020. All eyes were on the Federal Reserve over the past 24 hours, which delivered a 25 basis point rate hike, as expected. That brought benchmark lending rates to a range of 4.50% - 4.75%.


Gold Surges During the Federal Reserve Rate Decision



Gold Surges During the Federal Reserve Rate Decision


Gold Technical Analysis


Gold closed at a new high this year, taking out the January peak at 1949.16. That placed XAU/USD closer to the key 1978 – 1998 resistance zone. Negative RSI divergence is present, showing that upside momentum is fading. That can at times precede a turn lower. In such a case, the 20-day Simple Moving Average (SMA) could maintain the upside focus.

XAU/USD Daily Chart



XAU/USD Daily Chart


Chart Created Using TradingView


--- Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • Wheat Elliott Wave Analysis Function - Counter Trend Mode - Corrective Structure -Zigzag for wave (B) Position - Wave A of (B) Direction - Wave A is still in play Details -  As it appears the decline from 720’4 will most likely continue lower, we have adjusted the previous count. Price is now very likely in wave A of (B) against the 523’6 low. Wheat Elliott Wave Analysis Since late May, wheat has declined over 14% from 720, indicating that the commodity has retraced approximately half of the impulse rally that occurred between March 11th and May 28th. In the medium term, the move from March 11th remains a positive correction of the long-term bearish trend that spanned from March 2022 to March 2024—a two-year trend.   Daily Chart Analysis: On the daily chart, wheat completed a bearish impulse wave from March 2022 at 523’6 in March 2024. Following this trend, a corrective phase was anticipated in the opposite direction. The impulse reaction that concluded wave (A) at the May 2024 peak is part of this larger bullish correction. Given that wave (A) is an impulse, we can expect at least a zigzag structure or possibly a double zigzag if the bullish correction extends over several months. Following the path of least resistance, a simple zigzag structure—wave (A)-(B)-(C)—is highly probable. Currently, the price is correcting wave (A) downwards in wave (B). Provided that the ongoing decline stays above 523’6, an extension higher is expected. However, wave (B) does not appear to be finished yet, as evident from the H4 chart.   H4 Chart Analysis: On the H4 chart, the price seems to be in wave A of (B), which is evolving into an impulse structure. We anticipate a typical zigzag structure for wave (B). The invalidation level at 523’6 should not be breached. If it is, the long-term bearish trend from March 2022 will likely resume, confirming that the bullish correction from March 2024 has concluded.   Summary: Wheat has seen a significant decline since late May, retracing half of its recent impulse rally. The medium-term trend from March 11th remains a positive correction within the context of a long-term bearish trend that lasted two years. On the daily chart, the completion of the bearish impulse wave in March 2024 was followed by a bullish correction, which is currently in wave (B) of a zigzag structure. The H4 chart suggests that wave A of (B) is forming an impulse structure, with expectations of a typical zigzag correction.   Traders should monitor the key level of 523’6. If this level holds, the bullish correction is likely to continue with a potential extension higher. However, a breach below 523’6 would invalidate this scenario, signaling a continuation of the long-term bearish trend.  Technical Analyst : Sanmi Adeagbo Source : Tradinglounge.com get trial here!  
    • ZkSync leverages zero-knowledge proofs to improve Ethereum's scalability, offering faster transactions with lower fees. Its use of zkRollups positions it as a promising solution for decentralized applications and DeFi platforms. On Bitget, traders can engage with ZkSync, taking advantage of the exchange's features like a user-friendly interface and robust security measures. While ZkSync presents an opportunity for growth, it's important for investors to conduct thorough research and consider the project's long-term potential in the evolving crypto landscape.
    • COST Elliott Wave Analysis Trading Lounge Daily Chart, Costco Wholesale Corp., (COST) Daily Chart COST Elliott Wave Technical Analysis FUNCTION: Trend MODE: Impulsive STRUCTURE: Motive POSITION: Wave 5.   DIRECTION: Upside in wave {iii}. DETAILS: Looking for upside into wave {iii} as we seem to have completed wave {ii} of 5 after successfully completing the triangle in wave 4.     COST Elliott Wave Analysis Trading Lounge 4Hr Chart, Costco Wholesale Corp., (COST) 4Hr Chart COST Elliott Wave Technical Analysis FUNCTION: Trend MODE: Impulsive STRUCTURE: Motive POSITION: Wave (iii) of {iii} DIRECTION: Wave (iii). DETAILS: Looking for upside into wave (iii), knowing we could switch to a more conservative count where current wave (i) and (ii) is wave {iii} and {iv}. Equality of {iii} vs. {i} stands at 900$.   Welcome to our latest Elliott Wave analysis for Costco Wholesale Corp. (COST). This analysis provides an in-depth look at COST's price movements using the Elliott Wave Theory, helping traders identify potential opportunities based on current trends and market structure. We will cover insights from both the daily and 4-hour charts to offer a comprehensive perspective on COST's market behavior.   * COST Elliott Wave Technical Analysis – Daily Chart* In our Elliott Wave analysis of Costco Wholesale Corp. (COST), we observe an impulsive trend characterized by a motive structure. COST is currently positioned in wave 5, specifically in wave {iii} of 5, indicating an upside move. After successfully completing the triangle in wave 4, COST has finished wave {ii} of 5 and is now poised to move higher into wave {iii}. This wave is expected to gain momentum, pushing prices upward as it unfolds. Traders should monitor the progression of wave {iii} closely, as it may present opportunities for long positions, especially if COST continues to show strength above key resistance levels.   *COST Elliott Wave Technical Analysis – 4Hr Chart* On the 4-hour chart, COST is also following an impulsive trend within a motive structure, specifically in wave (iii) of {iii}. The analysis suggests an upside continuation into wave (iii), with an awareness that current wave (i) and (ii) might be a more conservative count as wave {iii} and {iv}. This suggests that if the market confirms this alternate view, COST could target equality of wave {iii} vs. wave {i} at $900. Traders should be prepared for potential adjustments in the wave count and watch for consolidation or corrective patterns that might precede further upward movements.   Technical Analyst : Alessio Barretta Source : Tradinglounge.com get trial here!  
  • Create New...