Powell: “More restriction coming”

BY Janne Muta

|June 29, 2023

The dollar traded higher and stocks remained mixed after Fed Chair Powell said the monetary policy hasn’t been restrictive that long, and that there is likely “more restriction coming.” Dow closed almost unchanged yesterday (0.2%) while Nasdaq gained 0.4% as Apple moved to new a record ($189.25) and Tesla jumped 2.4%. Figures on Tesla’s Q2 deliveries are expected over the coming weekend.

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Dax (0.37%) gained some ground right after Frankfurt opened for trading but then lost momentum and traded sideways for the rest of the day. Gold stayed bearish with the dollar strengthening as the markets are expecting the Fed hike in July. Euro bids have been soft as the markets question ECB’s willingness to hike in September and the expected July hike is already priced in. USDCAD is trending higher in the 2h chart as the Canadian CPI was in line with expectations.

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After rocketing higher last week on the news that BlackRock's application for a Bitcoin ETF could be accepted by the SEC Bitcoin is now trading near a weekly high (31 050) from April. This is a risk factor for the bulls that are timing their buys at current levels. Another risk factor is the fact that the market has created a lower high in the 8h chart.

The key support level to focus on is at 29 516. If the market breaks the level, we could see a move to 29 500 and then possibly to 28 300. Above 31 050, the market could move to 36 300. If BlackRock’s application gets approved some of its AUM (currently around $8.6 trillion) will be allocated to the fund. This would be likely to give the market another boost.

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Gold is bearish below 1918 and could move to 1885. Above 1918, the market is likely to move to 1935. Gold is trending lower as the US bond yields stay elevated and traders place almost 82% probability on a Fed rate hike in July. This has strengthened the dollar.

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EURUSD is bearish below 1.0930 and could move to 1.0850 and then possibly to 1.0810 on extension. Above 1.0930, the market could move to 1.0970. The Fed rate hike expectations together with the uncertainty related to the ECB’s willingness to hike in the September meeting are making the EUR bids softer. Based on the recent price action 25 bp hike in the July meeting is already priced in.

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USDCAD is bullish above 1.3230 and could trade to 1.3320. Below 1.3230, look for a move to 1.3180. USD bids have remained firm against the CAD after the Canadian CPI was in line with expectations.

The Next Main Risk Events

  • EUR German Prelim CPI
  • USD Fed Chair Powell Speaks
  • EUR Spanish Flash CPI
  • USD Final GDP
  • USD Unemployment Claims
  • USD Final GDP Price Index
  • USD Pending Home Sales
  • JPY Tokyo Core CPI
  • CNY Manufacturing PMI
  • CNY Non-Manufacturing PMI
  • NZD RBNZ Statement of Intent
  • EUR CPI Flash Estimate
  • EUR Core CPI Flash Estimate
  • USD Core PCE Price Index
  • USD Revised UoM Consumer Sentiment
  • CAD BOC Business Outlook Survey

For more information and details see the TIOmarkets economic calendar.

Trade Safe!

Janne Muta
Chief Market Analyst

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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