Central Bank Decisions and Testimony Drive Market Volatility

Introduction

In the wake of Federal Reserve Chair Jerome Powell’s testimony before the House Financial Services Committee, the US markets experienced a wave of uncertainty. The reaction to Powell’s comments was mixed, with stock markets bearing the brunt of his aggressive stance, while currency markets perceived him as insufficiently hawkish, resulting in a decline in the US dollar. This article examines the repercussions of Powell’s testimony and explores the expected market volatility in the coming days.

Markets React to Powell’s Testimony

Nasdaq Bears the Brunt of Powell’s Comments

Powell’s testimony left a significant impact on the stock markets, with all major US indices closing in the red for the third consecutive day. Among them, the Nasdaq suffered the most, experiencing a daily decline of 1.21%. The decline was further exacerbated by a 5.5% drop in Tesla’s stock price. Meanwhile, the S&P and the Dow also experienced losses, with their values decreasing by 0.3% on the day.

Currency Markets React Differently

Contrasting with the stock markets’ response, currency markets had a different take on Powell’s testimony. The Euro surged to new monthly highs, marking a 0.63% increase for the day. In contrast, the US dollar index plummeted by 0.43%. This discrepancy highlights the divergent reactions from investors and emphasizes the complex dynamics of the financial markets.

Anticipating Further Volatility

Factors Contributing to Market Volatility

The financial markets are bracing for another tumultuous day as investors face crucial central bank decisions, the release of tier 1 data, and additional testimony from Powell. The Asian market started off weakly following a disappointing day on Wall Street. With the absence of significant events on the calendar, the outlook for the Asian market remains pessimistic. However, once the European period begins, the situation may change, driven by significant rate calls from the Bank of England and the Swiss National Bank. The US session is also expected to witness heightened volatility, as the weekly unemployment report and Powell’s hearing before the Senate Banking Committee come into play.

Asian Session: Downward Pressure on the New Zealand Dollar

Economic Statistics Indicate Weaker Demand for NZ Products

During the Asian session, the New Zealand Dollar (NZD) faced downward pressure due to discouraging economic statistics. The Trade Balance, projected to reach 350 million NZD, fell significantly short at 46 million NZD. This substantial deviation indicates weaker demand for New Zealand products. Additionally, credit card spending witnessed a significant decline from 11.0% to 3.3% year over year, signaling a potential economic downturn and a decrease in consumer confidence.

Europe & US Session Expectations

CHF and GBP Experience Volatility

The monetary policy decisions of the Swiss National Bank (SNB) and the Bank of England (BoE) are expected to drive significant volatility in the pairing of the Swiss Franc (CHF) and the British Pound (GBP).

Swiss Franc: SNB Monetary Policy Assessment

Key News Events Today:

• SNB Monetary Policy Assessment
• SNB Policy Rate
• SNB Press Conference

What to Expect from CHF Today?

Anticipations are high for the Swiss National Bank (SNB) to increase the Policy Rate from 1.50% to 1.75%. This potential rate hike could attract foreign capital and subsequently strengthen the Swiss Franc. However, if the rate remains unchanged or if the SNB presents a gloomy economic forecast during the news conference, Franc’s value may decline.

Central Bank Notes:

• The policy rate was raised to 1.5% to counter inflationary pressure and ensure price stability.
• Potential for further rate increases in the future.
• Providing liquidity assistance to Credit Suisse, mitigating the crisis.
• The inflation forecast assumes a policy rate of 1.5% with average annual inflation projected at 2.6% for 2023 and 2.0% for 2024 and 2025.
• Ongoing vulnerabilities in the mortgage and real estate market.
• The next meeting is scheduled for 22 June 2023.

Next 24 Hours Bias: Weak Bullish

Pound: MPC Official Bank Rate Votes

Key News Events Today:

• MPC Official Bank Rate Votes
• Monetary Policy Summary
• Official Bank Rate

What to Expect from GBP Today?

The performance of the British Pound (GBP) hinges on the Monetary Policy Committee’s data releases. Projections indicate a 7-0-2 division in the MPC Official Bank Rate Votes, consistent with previous results. This implies an increase in the Official Bank Rate by 0.25%, raising it from 4.50% to 4.75%. However, this outcome may be influenced by the tone of the Monetary Policy Summary and any changes in the two dissenting votes.

Central Bank Notes:

• The MPC of the Bank of England (BoE) voted 7-2 to increase the Bank Rate by 0.25 percentage points to 4.5%.
• Updated projections suggest that CPI inflation will slightly exceed 1% at the two- and three-year horizons, remaining below the 2% target.
• Unexpected increase in CPI, with an anticipated sharp decline throughout the year due to lower energy prices.
• The next meeting is scheduled for 22 June 2023.

Next 24 Hours Bias: Weak Bullish

Gold (XAU): Responding to Interest Rate Speculation

Key News Events Today:

• No major news events.

What to Expect from Gold Today?

Gold prices may be influenced by recent comments made by Federal Reserve Chairman Jerome Powell, indicating the possibility of gradual interest rate hikes by the US Federal Reserve. Such rate hikes could strengthen the US dollar, as a higher value for the dollar tends to drive up the price of gold. Additionally, rising interest rates increase the opportunity cost of holding gold, potentially diminishing demand and pushing gold prices lower.

Next 24 Hours Bias: Weak Bearish

Global Market Overview

Asian Stock Markets: Mixed Performance

• Nikkei: Down 0.92%
• Shanghai Composite: Down 1.31%
• Hang Seng: Down 1.98%
• ASX: Down 0.63%

European Equities: Minor Declines

• DAX Futures: Down 0.55%
• CAC 40: Down 0.46%
• FTSE: Down 0.13%

US Stock Market: Declines Persist

• Dow Jones: Down 0.30%
• S&P 500: Down 0.52%
• Nasdaq 100: Down 1.21%

Commodities: Marginal Fluctuations

• Gold: $1927.78 (-0.22%)
• Silver: $22.53 (-0.47%)
• Brent Oil: $76.87 (-0.34%)
• WTI Oil: $72.31 (-0.30%)

News & Data

Key News Events:

• SNB Interest Rate Decision (Q2) Forecast: 1.75%, Previous: 1.50% at 13:00
• BoE MPC Meeting Minutes at 16:30
• BoE Interest Rate Decision (Jun) Forecast: 4.75%, Previous: 4.50% at 16:30
• Initial Jobless Claims Forecast: 260K, Previous: 262K at 18:00
• Fed Chair Powell Testifies at 19:30
• Existing Home Sales (May) Forecast: 4.25M, Previous: 4.28M at 19:30
• Crude Oil Inventories Forecast: 1.873M, Previous: 7.919M at 20:30

GBPUSD: Strong Movement and Key Levels

Introduction

In the foreign exchange market, the GBP/USD instrument is currently displaying a robust overall movement, indicating significant price action. Traders are observing the possibility of a brief decline followed by a bounce toward the first resistance level. The support and resistance levels play a crucial role in determining the potential trading opportunities for market participants.

Analyzing Support Levels

First Support Level: Overlap Support and Fibonacci Retracements

The initial support level at 1.2681 holds great importance due to its combination of overlap support, a 38.20% Fibonacci retracement, and a 50% Fibonacci retracement. This confluence of technical indicators adds to the level’s significance and trustworthiness. Additionally, the second support level at 1.2536 provides strong overlap support, reinforcing its relevance in the market.

Evaluating Resistance Levels

First Resistance Level: Swing High Resistance

On the upside, the first resistance level at 1.2823 acts as a significant barrier for the price. Instead of breaking past this level, it is more likely for the price to experience rejection near it. Traders should closely monitor the price action around this resistance level to identify potential trading opportunities.

Trade Suggestion for GBPUSD

Considering the technical analysis, a trade suggestion for GBP/USD is as follows:

• SELL at 1.2751
• Take Profit (TP) at 1.2786
• Stop Loss (SL) at 1.2730

EURUSD: Bullish Momentum Indicates an Upward Market Trend

Introduction

The EUR/USD chart currently exhibits bullish momentum, indicating a rising market trend. Traders should be aware of potential pullbacks towards support levels, which can provide favorable entry points for long positions.

Evaluating Support Levels

First Support Level: Pullback Support

A brief decline towards the first support level at 1.0991, acting as a pullback support, is possible. Traders can monitor the price action at this level to identify potential buying opportunities.

Second Support Level: Fibonacci Confluence and Overlap Support

The second support level at 1.0979 holds significance due to the confluence of the 61.80% Fibonacci Projection and the 78.60% Fibonacci Retracement. This overlap support adds to the level’s reliability and can attract market interest.

Analyzing Resistance Levels

First Resistance Level: Swing High Resistance

The 1.1001 resistance level serves as a swing-high resistance, while the 1.1024 resistance level represents a multi-swing-high resistance. These levels act as barriers to the price, and traders should closely monitor the price action around them for potential selling opportunities.

Trade Suggestion for EURUSD

Based on the technical analysis, a trade suggestion for EUR/USD is as follows:

• BUY at 1.0999
• Take Profit (TP) at 1.1022
• Stop Loss (SL) at 1.0982

AUDUSD: Bearish Momentum Signals a Downward Market Trend

Introduction

The AUD/USD chart indicates bearish momentum, suggesting a downward market trend. Traders should be cautious and consider potential shorting opportunities.

Analyzing Support Levels

Initial Support Level: Pullback Support and Fibonacci Retracement

The initial support level at 0.6781, acting as a pullback support, corresponds to the 23.60% Fibonacci Retracement. If the price continues its decline, it may break below this level.

Second Support Level: Pullback Support and Fibonacci Retracement

The second support level at 0.6745 coincides with the 38.20% Fibonacci Retracement. Traders should monitor the price action as it approaches this level, as it holds potential significance as pullback support.

Evaluating Resistance Levels

First Resistance Level: Swing High Resistance

The first resistance level at 0.6805 represents a swing high resistance. If the price attempts to move upward, it is likely to face resistance near this level.

Second Resistance Level: Fibonacci Extension Level

The second resistance level at 0.6837 aligns with the 127.20% Fibonacci Extension, making it an area of interest for traders. Price reactions around this level can provide insights into potential selling opportunities.

Trade Suggestion for AUDUSD

Considering the technical analysis, a trade suggestion for AUD/USD is as follows:

• SELL at 0.6781
• Take Profit (TP) at 0.6743
• Stop Loss (SL) at 0.6818

USDJPY: Bearish Momentum Indicates a Downward Market Trend

Introduction

The USD/JPY chart currently displays bearish momentum, indicating a downward market trend. Traders should focus on potential shorting opportunities and closely monitor key levels for potential reversals.

Analyzing Support Levels

First Support Level: Overlap Support

The first support level at 141.29 acts as an overlap support. Traders should consider this level significant due to its potential to attract buying interest and act as retracement support.

Second Support Level: Retreat Support

The second support level at 140.23 serves as retreat support. Traders should monitor the price action around this level, as it can influence market sentiment.

Evaluating Resistance Levels

First Resistance Level: Swing High Resistance

The 61.80% Fibonacci Retracement level and the first resistance level at 142.39 hold importance as significant barriers for the price. Additionally, the 141.92 intermediate resistance level serves as a swing-high resistance, which traders should closely monitor.

Trade Suggestion for USDJPY

Based on the technical analysis, a trade suggestion for USD/JPY is as follows:

• SELL at 141.83
• Take Profit (TP) at 141.60
• Stop Loss (SL) at 141.99

S&P 500: Bearish Momentum and Key Levels

Introduction

The US500 (S&P 500) chart exhibits bearish momentum, indicating a downward market trend. Traders should be cautious and consider potential short-selling opportunities.

Analyzing Support Levels

Initial Support Level: Pullback Support and Fibonacci Retracement

The initial support level at 4391.2, acting as a pullback support, aligns with the 61.80% Fibonacci Retracement. If the bearish trend continues, the price may reach this level.

Second Support Level: Overlap Support and Fibonacci Retracement

The second support level at 4331.2 exhibits overlaps support, accompanied by the 78.60% Fibonacci Retracement. This confluence of technical indicators adds to the level’s significance.

Evaluating Resistance Levels

First Resistance Level: Overlap Resistance

The first resistance level at 4439.2 represents an overlap resistance. Traders should closely monitor the price action around this level, as it can influence market sentiment.

Second Resistance Level: Swing High Resistance

The second resistance level at 4496.2 acts as a swing-high resistance. If

the price attempts to move upward, it is likely to face selling pressure near this level.

Trade Suggestion for S&P 500

Considering the technical analysis, a trade suggestion for S&P 500 is as follows:

• SELL at 4362.13
• Take Profit (TP) at 4338.32
• Stop Loss (SL) at 4385.52

WTI CRUDE OIL: Ascending Channel Indicates Bullish Momentum

Introduction

The price movement within an ascending channel on the WTI Crude Oil chart suggests bullish momentum. Traders should consider potential buying opportunities as the price continues its upward trend.

Analyzing Support Levels

Initial Support Level: Overlap Support

The initial support level at 69.62 represents an overlap of support. Traders should monitor this level as it can attract buying interest and act as a support level during pullbacks.

Second Support Level: Multi-Swing Low Support and Pullback Support

The second support level at 66.73 serves as a multi-swing low support and also aligns with the 23.60% Fibonacci Retracement. This level holds significance and can attract buyers during price declines.

Intermediate Support Level: Pullback Support

An intermediate support level at 71.95 acts as a pullback support. Traders should keep an eye on this level, as it can provide potential buying opportunities.

Evaluating Resistance Levels

First Resistance Level: Overlap Resistance

The first resistance level at 72.16 represents an overlap resistance. If the price continues its bullish movement, it is likely to face selling pressure near this level.

Intermediate Resistance Level: Swing High Resistance

The 73.27 intermediate resistance level serves as a swing high resistance. Traders should closely monitor the price action around this level, as it can influence market sentiment.

Trade Suggestion for WTI Crude Oil

Based on the technical analysis, a trade suggestion for WTI Crude Oil is as follows:

• BUY at 72.54
• Take Profit (TP) at 74.02
• Stop Loss (SL) at 71.59

SILVER: Bearish Momentum Indicates a Downward Trend

Introduction

The market for silver currently exhibits bearish momentum, indicating a downward trend. Traders should focus on potential selling opportunities and closely monitor key levels for potential reversals.

Apologies for the previous incomplete response. Here’s the continuation:

Analyzing Support Levels

First Support Level: Overlap Support

The first support level at 22.51 represents overlap support. Traders should pay attention to this level as it holds potential significance in attracting buyers and acting as a support level during downward movements.

Second Support Level: Overlap Support

The second support level at 21.64 also acts as an overlap support. It further strengthens the importance of this level and should be closely monitored by traders.

Evaluating Resistance Levels

Initial Resistance Level: Multi-Swing High Resistance

The initial resistance level at 23.15 is identified as a multi-swing high resistance. If the price attempts to move upward, it is likely to face selling pressure near this level.

Second Resistance Level: Overlap Resistance

The second resistance level at 24.13 represents an overlap resistance. Traders should closely observe the price action around this level as it can influence market sentiment.

Trade Suggestion for SILVER

Considering the technical analysis, a trade suggestion for silver is as follows:

• SELL at 22.49
• Take Profit (TP) at 22.14
• Stop Loss (SL) at 22.83

BITCOIN: Bullish Momentum Indicates a Rising Market Trend

Introduction

The BTC/USD chart currently exhibits bullish momentum, pointing to a rising market trend. Traders should consider potential buying opportunities and monitor key levels for potential price movements.

Analyzing Support Levels

First Support Level: Pullback Support

The first support level at 29702 operates as pullback support on the downside. Traders should pay attention to this level as it can attract buying interest during price retracements.

Second Support Level: Additional Pullback Support

The second support level at 28444 serves as additional pullback support. It adds to the significance of support levels and should be closely monitored.

Evaluating Resistance Levels

First Resistance Level: Swing High Resistance

The first resistance level at 30911 represents a swing high resistance. If the price continues its bullish movement, it is likely to face selling pressure near this level.

Second Resistance Level: Swing Strong Resistance

The 61.80% Fibonacci Projection and the second resistance level at 32024 are recognized as swing-strong resistance levels. These levels hold importance and can influence price movements.

Trade Suggestion for BITCOIN

Based on the technical analysis, a trade suggestion for Bitcoin is as follows:

• BUY at 30116
• Take Profit (TP) at 30217
• Stop Loss (SL) at 30038

In conclusion, traders should consider the technical analysis provided for each currency pair or asset and make informed decisions based on their trading strategies. It’s important to monitor price movements, support levels, resistance levels, and market sentiment to maximize trading opportunities.

Conclusion

In summary, following Federal Reserve Chair Jerome Powell’s testimony, US markets experienced mixed reactions. While stock markets suffered significant losses, currency markets felt that Powell’s stance was not hawkish enough, resulting in a weakened US dollar. Today’s financial markets are expected to remain volatile due to central bank decisions, important economic data, and additional testimony from the Fed Chair. The Swiss Franc (CHF) and British Pound (GBP) are likely to see notable fluctuations based on the monetary policy decisions of the Swiss National Bank (SNB) and the Bank of England (BoE), respectively. Meanwhile, the price of gold could be influenced by the anticipation of future interest rate hikes.

FAQs

1. Q: What were the major outcomes of Federal Reserve Chair Jerome Powell’s testimony before the House Financial Services Committee?
   • A: The testimony had a mixed response from US markets, with stock markets experiencing significant losses and currency markets perceiving Powell’s stance as not hawkish enough, resulting in a weakened US dollar.
2. Q: Why did the Nasdaq experience a significant decline?
   • A: The Nasdaq fell by 1.21% primarily due to Tesla’s 5.5% decline, which had a significant impact on the index.
3. Q: What can we expect from the Swiss National Bank (SNB) regarding the Policy Rate?
   • A: It is anticipated that the SNB might increase the Policy Rate from 1.50% to 1.75%, which could potentially raise the value of the Swiss Franc. However, if the rate remains unchanged or if the SNB presents a pessimistic economic forecast during the news conference, Franc’s value may decline.
4. Q: What are the key decisions and events affecting the British Pound (GBP) today?
   • A: The MPC Official Bank Rate Votes and the Monetary Policy Summary are crucial data releases that will impact the performance of the pound. Projections suggest a potential 0.25% increase in the Official Bank Rate, along with insights from the Monetary Policy Summary and any changes in dissenting votes.