Charts Of The Week: Focus on the FOMC

Market Analysis / 4 Min Read
Milan Cutkovic / 15 Jun 2021

HIGHLIGHTS:

  • Ahead of this week’s FOMC, the question is whether the Fed will maintain its dovish stance or shift slightly more hawkish
  • Tech sector to be the biggest beneficiary if a dovish stance prevails
  • European equity markets struggling to gain momentum
  • Volatility in gold is picking up, and traders are keeping a close eye on the 200 DMA

USTECH

The focus this week will be on the FOMC meeting. There’s little doubt that the US central bank will keep rates unchanged; the question is whether the Fed will maintain its dovish stance or shift to a slightly more hawkish one.

While the upcoming forecasts are likely to reflect rising inflation expectations, the Fed is likely to refrain from any taper talks to avoid another panic. Traders still remember the so-called taper tantrum of 2013 – a surge in yields caused by an unexpected announcement by the Fed that it was considering a tightening of monetary policy.

Should the Fed maintain its dovish stance, US stocks are likely to extend gains, with the technology sector the biggest beneficiary. USTECH is already trading near the record high, and a daily close above this level could pave the way for a rally towards the psychological resistance level at 14,500 points.

GER30

Meanwhile, European equity markets are struggling to gain momentum. Investors remain optimistic amid an unwinding of COVID-19 restrictions across the continent, which should bolster the economic recovery. Nevertheless, there is a lack of catalysts that could give EU equities another major boost. Much will depend on the FOMC meeting this week – EU equities are likely to benefit from a rally on Wall Street.

The outlook for the GER30 remains mildly bullish. The index should find imminent support at the rising trendline from the May low, followed by the 15.500/10 support zone. As long as the former support level holds, GER30 bulls have the upper hand. To the topside, traders will keep a close eye on the 15.800 resistance level. A clear breakout above this level could trigger momentum buying and push the index towards the psychological resistance level at 16,000 points

Gold Markets

Volatility in Gold is picking up, and traders are keeping a close eye on the 200 DMA. XAU/USD briefly fell below this major line of support today, but managed to bounce back. The pressure is increasing, and Gold bulls need this level to hold, as a daily close below the 200 DMA could pave the way for a deeper correction towards the 50% Fibonacci level of the March-May recovery rally, which lies at $1796.84.

GBP/USD

UK Prime Minister Johnson announced today that England´s COVID-19 restrictions will be extended for another four weeks, amid a surge in deaths and hospitalizations. This has been driven by the appearance of the new delta virus variant. The muted market reaction shows that traders were already expecting such an outcome and don´t see it as a major risk. Recent economic data showed that the UK economic recovery is picking up momentum, and this is keeping the bullish GBP sentiment alive. GBP/USD is consolidating within a relatively tight range, and it will take a clear breakout above 1.4250 or below 1.40 to get the currency pair moving again.

The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.

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