FOMC Statement Later: What's Next in US Dollars, Stocks, Bitcoin, Oil and Gold?
Around less than 12 hours from now, the Fed will be releasing its rate hike decision. What's gonna be the effect of that on US dollars (DXY), equities, cryptocurrencies like Bitcoin and alt coins, as well as oil and gold?
Disclaimer: This is the author's speculation only and not meant to be financial advice. Do your own research and due diligence. Please see the Disclaimer page. When it comes to the Fed and other high risk economic news events, it's best to stay away from trading now to avoid getting whipsawed and simply trade the aftermath.
In the hopes of controlling and pushing down inflation risks, Jerome Powell decides to have more aggressive monetary policies.
How the upcoming rate hike is gonna affect USD, equities, crypto, oil, and gold later depends on how many basis-points Powell is gonna push for tonight and how much is already priced-in advance by the markets.
Initially, the plan was another 50 basis-points just like in May.
But recently a "rumor" is circulating that 75 basis-points is now on the table, with Goldman Sachs, JP Morgan, and Nomura Holdings, joining Barclays' Friday stance -- hence the bloody Monday yesterday in both equities and crypto.
Anyway, let's take a look at the possible scenarios.
DXY
The USD index began to rise starting mid-last year after rumors of Fed's new hawkish stance begins to circulate -- and eventually confirmed by its aggressive bond-buying in November last year, and interest rate hikes starting March this year.
50 bps - if the Fed decides to raise 25-50 bps like last March and May, DXY will most likely drop somewhere near 100.
75 bps - if the Fed decides to raise 75 bps as "rumored", DXY will most likely start going sideways near 103.5
100 bps - if the Fed decides to shock the market with 100 bps later, DXY will surely soar to next 61.8 fib at 108.
S&P 500
Since the beginning of 2022, S&P 500 finally ended its 5th wave up and started losing steam, especially when market sentiment became risk-off due to the Ukraine-Russia conflict, as well as the hawkish Fed.
50 bps - most likely S&P 500 will surge and start climbing its way to its previous high, if not make a new high at 5000.
75 bps - most likely S&P 500 will rebound near 4300, then go sideways around 4000.
100 bps - most likely S&P 500 will continue spiraling down near 3000 with delivery, basic consumer goods, and fast food companies like FedEx, Walmart, and McDonald's respectively, the only ones in green.
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Bitcoin
Bitcoin began its bearish trend 2 months earlier the equities at November last year, after slightly surpassing its previous high at 64k back in April 2021, and after the Fed starts buying back bonds.
50 bps - Bitcoin will most likely recover up and then go sideways at 30-40k.
75 bps - Bitcoin will most likely hold the 20k support and rebound up to 30k near its daily 0 fib level.
100 bps - Bitcoin will continue plunging down and most likely will break the recent 20k support, and worse, make its way to 12k (61.8 weekly fib). Most alt coins will be in double-digit red too.
Oil
Less supply = Higher prices. Add the Ukraine-Russia issues and the US Colonial Pipeline hack, and the resurgence of demand for travel and energy in general post-pandemic, and we get soaring oil price -- which directly causes this increasing inflation risk globally, and which central banks are trying their best to curb.
Whether hawkish monetary policies can effectively push consumer demands down and also make oil less appealing to buyers before the cold season -- without triggering recession is yet to be seen.
50 bps - Oil will most likely have a correction down to 110 or lower, before making a new high at 140 and beyond.
75 bps - Oil will most likely go sideways near 115 (61.8 fib level in daily chart).
100 bps - Oil will continue its double-top and drop further, possibly even reaching below 100 though not immediately (most likely when another rate hike sometime in August or September is also due).
Gold
Gold remains to move sideways on the weekly chart. However, it used to be mildly bullish in the daily chart until last March after almost surpassing its August 2020 high near 2100 (0 fib level in the weekly chart).
50 bps - Gold will most likely rebound up earlier, before going sideways instead of reaching its previous high at 2024.
75 bps - Gold will probably bounce near 1800 and starts to recover up to 2000.
100 bps - Gold will most likely continue going sideways and slowly drop to 1700 (61.8 fib in the weekly chart) sometime late this year.
Featured photo by Jose Antonio Vazquez through Pexels.
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