Fed’s Powell Moves The Markets Once Again

Feb 25 21, 11:45 GMT

US stock markets were on the rise yesterday, with the Dow Jones reaching new record highs, as Powell reiterated his dovish message. The Fed’s Chairman once again pledged that the bank is to maintain an accommodative stance with a loose monetary policy, this time before the House of Representatives in his second testimony this week. At the same time, it should be noted that the USD was pressured lower against a basket of its counterparts given the expected continuance of high USD supply. Also, it should be noted that the Fed’s dovishness was so strong that rise of US yields failed to support the USD substantially. Overall, we expect today’s attention to turn to the financial releases which are forecasted to show an improvement for the US economy and if so, we may see the USD getting some support.

Dow Jones rallied yesterday breaking the 31640 (S1) resistance line, now turned to support and continued higher testing the 32000 (R1) round number. We tend to maintain a bullish outlook for the index, given the steepness of its rise, yet at the same time the same steepness tends to provide worries. It’s characteristic that the RSI indicator below our 1-hour chart is above the reading of 70, which confirms that the bulls are in charge, yet at the same time may imply that the index is overbought and a correction lower is imminent. Should the bulls maintain control over the index, we may see it breaking the 32000 (R1) resistance line and aim for the 32300 (R2) level, yet mind you that the index is allready at record new high levels. Should the bears take over, we may see the index reversing course breaking he 31640 (S1) support line on its journey southwards.

WTI rises despite build-up of inventories

Oil prices rose yesterday and characteristically WTI prices reached their highest levels since January 2020 despite an unexpected buildup of inventories being announced by the EIA. It should be noted that Fed Chairman Powell’s dovish message underpinned expectations for quicker rebound of economic activity and thus higher consumption of oil in the near future. At the same time, it should be noted that on the supply side, next week OPEC+ group is to discuss a possible easing of the production curbs while extra voluntary cuts by Saudi Arabia in February and March tightened supply levels. Should the market sentiment continue to be heavily influenced by market expectations for a rise of oil consumption we may see WTI rising further.

WTI prices rose yesterday breaking the 63.00 (S1) resistance line, now turned to support and continued to hover above it during today’s Asian session. We maintain a bullish outlook for the commodity as long as it remains above the upward trendline incepted since the 22nd of February. Should the buying interest be extended as expected we may see the commodity aiming if not breaching the 65.40 (R1) resistance line, yet as mentioned in the fundamentals, please note that WTI prices are allready at a 13 month high, which may make the buyer’s labour more difficult. Should a selling interest be displayed by the markets, we may see WTI’s price action breaking the 63.00 (S1) support line and aim for the 61.15 (S2) level.

Other economic highlights today and early Tuesday:

During today’s European session, we note Germany’s more far looking GfK consumer sentiment for March, Eurozone’s economic sentiment for February and Eurozone’s final consumer sentiment for the same month. In the American session, we note from the US the release of the durable goods orders for January, the 2nd estimate of the GDP rate for Q4 as well as the weekly initial jobless claims figure, while just before the Asian session starts we get New Zealand’s trade data for January. On the monetary front please note that ECB’s Lane and De Guindos as well as Fed’s Bostic, Quarles and Williams are scheduled to speak today. During tomorrow’s Asian session among a slew of data from Japan, we highlight Tokyo’s inflation rates for February, the retail sales growth rate for January and the preliminary industrial output growth rate for January. Calendar follows

US30 Cash H1 Chart