Breaking News
Investing Pro 0
New Year’s SALE: Up to 40% OFF InvestingPro+ CLAIM OFFER

Week Ahead: Fed Meeting Will Test The Short-Term Rebound

By Investing.com (Pinchas Cohen/Investing.com)Market OverviewOct 30, 2022 13:25
uk.investing.com/analysis/week-ahead-fed-meeting-will-test-the-shortterm-rebound-200543859
Week Ahead: Fed Meeting Will Test The Short-Term Rebound
By Investing.com (Pinchas Cohen/Investing.com)   |  Oct 30, 2022 13:25
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
XAU/USD
-0.05%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
US500
+0.25%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DX
+0.10%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
Gold
-0.10%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
BTC/USD
+0.77%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • Every time the short-term trend rises, traders believe rates will ease
  • While some central banks began slowing rate hikes, the ECB persisted
  • US data and Fedspeak suggest the Fed will persist as well

The Federal Open Market Committee's interest rate decision will test the most extended weekly advance since August. The two-week bounce defied disappointing earnings on the outlook that the Fed will slow its rate hikes. Perhaps traders' expectations flip on this theme according to the ebb and flow of the market price action.

After the S&P 500 Index met a ceiling in mid-August at the top of its falling channel since its January record, investors were concerned that the Fed's aggressive path to rising interest rates would push the economy into a recession. Before that, when the price rebounded from the mid-June low's test of the channel, the market narrative dictated that inflation was easing, and so would the Fed's jumbo hikes.

Now, the momentum is up after the price bottomed out in the short term, within the medium-term downtrend. In last week's post, I reiterated that stocks could rise in the short term but are on a trajectory to continue lower in the medium term.

The market has bet again and again on a less hawkish Fed, and so far, that has been proven wrong with each end of the short-term uptrends as stocks resynchronized with the medium-term downtrend.

As I showed above, the risk-on risk-off narrative correlated with the short-term swings within the downtrend, the so-called "Fed pivot" drummed up since the summer lows and repeated itself with each bounce. So far, overall data demonstrated persistent inflation, and a hawkish Fed posturing remained steadfast amid ongoing pressure to ease its rate hikes.

Investors also expect central banks around the world to ease tightening. The Reserve Bank of Australia lifted interest rates by a smaller-than-expected 25 basis points on October 4. The Bank of Canada slowed its rate hike by only 0.5%, lower than the 0.75% consensus on October 26.

On the other hand, The European Central Bank maintained the 0.75% rate hike, its fastest rise in history, fuelling recession fears after investors expected a lower 0.5% increase on Thursday. Moreover, ECB President Christine Lagarde pledged to maintain the path to higher rates until reaching the 2% target.

Meanwhile, the yield curve deepened, flashing another recession alarm bell.

US 10-year vs. 3-Month Chart
US 10-year vs. 3-Month Chart

On Wednesday, the 10-year note yield fell below the three-month bill. This specific inversion is rare, demonstrating that investors expected the Fed's persistent and unwavering tightening would push the economy into a recession.

The dollar fell for the second straight week.

US Dollar chart
US Dollar chart


The dollar bounced to end the week, extending above the medium-term uptrend, after having registered a descending series in the short term, demonstrating the tension ahead of the US rate decision.

Gold fell despite dollar weakness, as investors preferred to take their money to stocks.

Gold Futures Chart
Gold Futures Chart

Gold is developing an H&S continuation pattern, having completed a massive double-top since April 2020.

Bitcoin climbed last week to a six-week high on a short squeeze in a risk-on week.

Technically, however, the trend is still down.

Bitcoin Weekly Chart
Bitcoin Weekly Chart

The peaks and troughs are descending, and the cryptocurrency completed a massive top, a development I've been monitoring since January.

Disclosure: The author has no positions in any instruments mentioned in this article.

Week Ahead: Fed Meeting Will Test The Short-Term Rebound
 

Related Articles

Alfonso Peccatiello
Recession or Soft Landing? By Alfonso Peccatiello - Jan 23, 2023

The soft landing crew is increasingly taking over. No, the bond market’s base case is not a recession - it’s immaculate disinflation. Getting this call right is crucial for your...

Week Ahead: Fed Meeting Will Test The Short-Term Rebound

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Shakeel Ahmed
Shakeel Ahmed Oct 31, 2022 11:09
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Down ok.
Sepehr Pazoki
Sepehr Pazoki Oct 31, 2022 9:03
Saved. See Saved Items.
This comment has already been saved in your Saved Items
👍🏻
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email