Jerome Powell rekindles rumours of possible tapering during press conference

June 17, 2021 15:30

If last week we commented that the market's attention was focused on the inflation data coming from the United States, where we finally saw how this has soared to 5% year-on-year, this week the attention in the markets has focused on the meeting of the Federal Reserve and the words of its chair at the subsequent press conference.

Although we cannot find any reference to the dreaded tapering in the monetary policy statement, during Jerome Powell's press conference, the chairman of the Federal Reserve announced that, if the economic recovery continues at the current pace, the FED would be willing to assess this possibility at forthcoming meetings. However, the market consensus does not expect any announcements or reactions until after the annual Jackson Hole symposium in August.

It should be remembered that current interest rates in the United States are in the range of 0-0.25%, with its asset purchase plan totalling up to $120 billion per month. This means that any announcements involving a change of the current policy could affect the main stock indexes. If tampering were to begin, the monthly purchases would be reduced.

As we have mentioned in previous articles, the main one affected by a possible rise in interest rates is the Nasdaq technology index, as the debt structures of such companies make them the most sensitive to this type of change.

If we look at the daily chart of the NQ100, we can see that after briefly overcoming the green resistance zone marking new all-time highs, the price has started a correction in search of its 18-session moving average, which currently acts as its main support level due to increased doubts and volatility.

At the moment, the price has several levels of support before reaching the long-term uptrend line so as long as it does not lose these levels the feeling will remain upside. Despite this, we will have to be very attentive to the next macro data and the possible words by the Federal Reserve or by the US Treasury through Janet Yellen, in the face of possible changes in the current policy.

Source: Admiral Markets MetaTrader 5. Daily chart of the NQ100. Data range: October 19, 2020 to June 17, 2021. Prepared on June 17, 2021 at 10:50 a.m. CEST. Please note that past returns do not guarantee future returns.

 

Evolution in the last 5 years:

  • 2020: 43,64%
  • 2019: 35,23%
  • 2018: -3,88%
  • 2017: 28,24%
  • 2016: 7,50%

 

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