Market Analysis: Powell's Speech Weakens USD

Yesterday, the Federal Reserve published a unanimous decision to leave the base rate unchanged for the third time in a row, which coincided with the expectations of most market participants. At the conference that followed, Powell's rhetoric was not as harsh as before. According to him:

→ economic activity is slowing, but the labor market remains strong;

→ inflation is still high, the Fed is committed to achieving the 2% target;

→ rates may rise if the US economy grows above expectations;

→ during discussions within the Fed, the topic of lowering rates becomes more relevant.

As a result, the increasingly clear prospect of rate cuts weakened the dollar greatly:

→ increased currency price relative to USD. The pound rose in price from the important support of 1.25, which we wrote about yesterday.

→ gold rose in price, again rising above the psychological level of $2,000 per ounce, as we expected in the analysis of December 5;

→ US stock indices rose in price.

In particular, the Dow Jones index set a historical maximum, and the S&P 500 is close to it. The graph shows that:

→ the price of the S&P 500 forms an ascending channel (shown in blue). The bearish breakout at the end of October turned out to be false;

→ after yesterday’s events, the price rose to the upper half of the channel, indicating positive sentiment in the market;

→ if the trend continues, the price may reach the upper boundary of the channel —  while setting a historical maximum;

→ the resistance at 4,600 has been confidently broken, in the future it can serve as support;

→ RSI is in the overbought zone – the highest this year on the daily time frame;

→ it is possible that after a stormy week the S&P 500 will cool down – that is, consolidate, with the probability of testing the level of 4,700.

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