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A 75 Basis Point Hike by the Fed Comes as a “Relief” Unlike Oil Reserves
28.07.2022

Most markets have seen a strong rebound including the SNP500 which increased by 2.62%, Bitcoin which increased by 1.33%, and even Gold 1.01% since last night’s Fed announcement. Looks like investors are ready to ramp up their risk sentiment. The die has been cast; the Fed will not increase interest rates by more than 75 basis points.

The Chairman of the Federal Reserve said that the Fed could slow rate hikes in the coming months. He also added that there could be some more financial tightening “in the pipeline” from the hikes that have already been made, but it may have not fully affected the economy yet. Many economists have advised that the market was reacting to several things, including the fact the Fed stuck to a 75 basis point hike and did not go more aggressively.

However, the market is not resting now that the new interest rate hike has been confirmed. The US is due to announce the national Gross Domestic Product, which is predicted to be confirmed at 0.4%; this would mean that the US is only just able to avoid a formal recession. The market will be keeping an eye out for the GDP, along with the US Jobless Claims figures which are expected to remain around the 250,000 mark as the week below.

The weakening of the US Dollar has also prompted bullish movement across many markets including Gold. Gold has been struggling over the past 2 months due to the strengthening of the Dollar and interest rate hikes. The question remains as to whether the Dollar’s bullish trend, which we have been experiencing this year so far, is over or if this is simply a temporary pause during the quarterly earnings season which will continue for another month.

USDJPY

USDJPY - 28.07.2022.jpg USDJPY 4-Hr Chart on Thursday, July 28th.

The USD/JPY continues its downward trend with the price forming three strong impulse waves, managing to reach lower price lows. In addition to this, bullish momentum is currently minimal, ensuring that the price remains within a bearish Elliot Wave style trend. The price is still declining with certainty but is also very close to reaching the price’s next support level at 134.730.

Based on Elliot Wave trends the price may potentially form a retracement soon, as it has already formed a new impulse wave and crossed to a lower price. This is something traders are keeping in mind. The US Dollar Index has declined by 0.28% this morning, taking the index to 106.15.

The price of the Japanese Yen is generally increasing in value against most competitors after the release of the government’s latest economic outlook report for the next quarter. According to the report, the country is showing signs of economic growth, higher economic activity, and an improving employment sector. However, some economists have voiced concern about a bullish Yen after the currency has performed poorly this year so far.

Crude Oil

USOUSD - 28.07.2022.jpg Crude Oil 4-Hr Chart on Thursday, July 28th.

The price of Crude Oil has formed a symmetrical triangle but is showing its latest price movement in favor of long positions. The asset is currently attempting to break outside the symmetrical triangle pattern in order to form a higher price high. The bullish trend is supported by data on the reduction of oil reserves in the US and a decrease in gas supplies to the European Union from Russia.

Currently, the price is experiencing supply concerns but traders are still cautious about higher interest rates and whether this will dampen demand over the coming months. In particular, one concern is whether the central bank will continue to increase interest rates above 3.5%. The Chairman of the Federal Reserve has advised that future monetary policy will depend on data from the economy. The Central Regulator will refrain from forward guidance. Therefore the next Consumer Price Index will again play a major role in the pricing of Crude Oil.

The Crude Oil Inventories index published yesterday, recorded a drop in the index by 4.037M barrels, which is significantly higher than the forecasted value of − 1.121M barrels. At the same time, the Russian energy giant, Gazprom, has reduced the Nord Stream gas pipeline load to 20% of its nominal capacity. Fears of a complete halt in the supply of Russian gas forced European countries to switch to reducing gas consumption and reorienting industrial facilities to other types of fuel, in particular oil, which affects demand.

Key Takeaways

  • Most stocks and cryptos are seeing a strong rebound
  • The Federal Reserve announced a 75 Basis Point Hike
  • The Fed advises that they may slow down hikes if the figures allow
  • The market is concerned that Russia will reduce Nord Stream gas supply further
  • The market awaits the release of US GDP and Jobless Claims figures
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