US stocks staged a major rebound on Monday as investors readjusted to the new Federal Reserve policies. The Dow Jones index rose by more than 500 points, its best single-day performance since October last year. The S&P 500 and Nasdaq 100 indices rose by 58 and 110 points respectively. This performance was led by the industrials and finance sectors. Government bond prices retreated, with the 10-year yield rising to 1.481%. In its meeting last week, the Fed hinted that it would start hiking interest rates in 2023 earlier than the previous guidance of 2024. Later today, investors will listen to Jerome Powell who will testify in Congress. In prepared remarks, the chair said that the economy has shown sustained improvements.
Cryptocurrency prices retreated sharply after China intensified its crackdown on digital currencies. The country has already expanded its crackdown on miners to other regions. This became more evident with the overall falling hash rate. At the same time, China ordered several big banks and fintech companies like Ant Financial to intensify their crackdown. It ordered these firms to investigate and identify bank accounts that facilitated trading and block all transactions. This crackdown is notable since China has the biggest market share in Bitcoin mining because of its cheap power.
The economic calendar will be relatively muted today with no major data scheduled. The only important number will be the US existing home sales data. While the number is important, it will likely not lead to major movements in the market. The biggest catalyst will be the Fed Chair testimony in congress. Historically, his first day of testimony is usually more eventful than in the second day. The UK will publish data on public sector borrowing while the American Petroleum Institute (API) will publish the latest crude oil inventory data.
BTCUSD
The BTCUSD pair declined from last week’s high of more than 40,000 to 32,000. A closer look at the four-hour chart shows that the pair has struggled to move below the 32,000 mark. It has also fallen below the 25-day and 15-day moving averages while the price is lower than the 23.6% Fibonacci retracement level. The pair seems to be forming an inverted cup and handle pattern. Also, on the daily chart, it has formed a bearish flag pattern and a death cross pattern. Therefore, the pair will likely keep falling as bears target the next key level at 30,000.
EURUSD
The EURUSD pair staged a relief rally on Monday after it crashed to a multi-month low of 1.1850. On the four-hour chart, the pair has moved back to the 61.8% Fibonacci retracement level. It also remains below the short and long-term moving averages and the descending channel shown in pink. Therefore, the pair will likely resume the downward trend ahead of, or during Jerome Powell’s testimony.
EURGBP
The EURGBP pair retreated on Monday as traders started to refocus on the upcoming Bank of England (BOE) decision. It is trading at 0.8558, which is slightly lower than the intraday high of 0.8600. The pair has also formed a descending channel pattern and moved below the 25-day and 15-day moving averages. It is also below the 61.8% retracement level. Therefore, the pair will likely keep falling ahead of the BOE
