The FED meeting could tip the balance of the markets
The US markets were disrupted by growing fears of a possible rebound in inflation, causing an increase in US bond yields and instability, mainly on the Nasdaq. The upcoming Federal Reserve meeting and subsequent press conference with Jerome Powell, has the eyes of the financial markets as this could tip the balance in one direction or another.
Given that no changes are expected in interest rates, investors will mainly focus on the rhetoric and possible measures related to both inflation and the IRRs of bonds, as a tepid response to inflation could increase expectations that this could skyrocket in the coming months, possibly dragging bond yields once again.
Some analysts point out that a rise in bond yields of up to 2% could cause a drop of up to 20% on the Nasdaq.
Therefore, some investors see today's meeting as a critical situation, since Jerome Powell, on several occasions, has repeated that recovery is still far in the distance and flexible economic policy is still necessary.
In recent days, we have been able to observe how the increase in yields on US bonds has driven the dollar index against other currencies, so today's meeting could also give us clues to where this currency can move if it finally the Federal Reserve announces measures to control IRRs.
Technically speaking, if we look at the daily chart of the US dollar index we can find that the price is currently in a bullish channel after hitting lows at the beginning of the year at $ 89.21.
This channel is taking the price close to its 200 session average, so it is interesting to see if the price finally decides to face this important resistance level. During the last months, the price has followed a clear downward trend, so the breakdown of this level could confirm a possible change in trend.
Source: Admiral Markets MetaTrader 5. Daily chart of the dollar index. Data range: from December 5, 2019, to March 17, 2021. Prepared March 17, 2021, at 12:10 CET. Keep in mind that past returns do not guarantee future returns.
Price evolution in the last 5 years:
- 2020: -6.42%
- 2019: 0.34%
- 2018: 4.26%
- 2017: -10.22%
- 2016: 3.59%
With the Admiral Markets Trade.MT5 account, you can trade Contracts for Differences (CFDs) of the EUR/USD and more than 3000 stocks! CFDs allow traders to try to profit from the bull and bear markets, as well as the use of leverage. Click on the following banner to open an account today:
INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admiral Markets investment firms operating under the Admiral Markets trademark (hereinafter “Admiral Markets”) Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
- With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- The Analysis is prepared by an independent analyst, Roberto Rojas (analyst), (hereinafter “Author”) based on their personal estimations.
- Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.
- Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.