The markets were rocked by the “clear-cut” hawkish remarks by Fed Chair Jerome Powell overnight. In short, “he indicated that ultimate level of interests is “likely to be higher than previously anticipated”. Fed is also “prepared to increase the pace of rate hikes”. He also warned against “prematurely loosening policy. More here.
As a result, Fed fund futures are now pricing in 73% chance of a 50bps rate hike to 5.00-5.25% on March 22, comparing to just 31% a day ago.
The stock markets were sold off deeper, with DOW losing -1.72% or -574.98 pts to close at 32856.46. Technically, it isn’t the end of the world for DOW… yet, as it’s staying in familiar range despite the selloff The rejection of 55 day EMA is a bearish sign though.
So, near term focus is now back on 38.2% retracement of 28660.94 to 34712.28 at 32400.66. As long as this level holds, DOW is just in a sideway consolidation pattern.
However, sustained break there will suggest bearish reversal and at least bring deeper fall to 61.8% retracement at 30972.55.
Dollar index closed sharply higher on expectation of more aggressive Fed and risk aversion The support from 55 day EMA is a near term bullish sign. But DXY will still need to overcome 38.2% retracement of 114.77 to 100.82 at 106.14 to confirm underlying momentum.
Rejection by 106.14 will keep the rise from 100.82 as a corrective move and maintains medium term bearishness for another fall through 100.82 at a later stage. However, sustained break of 106.14 will indicate trend reversal and bring stronger rally to 109.44, and possibly above.
