What market participants expected:
- 2023 Sept: Betting one last rate hike (a 4th in year 2023) in Nov/Dec FOMC meeting.
- 2023 Dec: No rate hike in Dec FOMC meeting. Afterwards, expected the Fed to cut in March 2024
What the Fed told us:
- According to the 'dot plot', majority of committee anticipate a 50-100 bps cut by the end of 2024.
- Powell once said the Fed will act if inflation comes back up.
USD movement:
- "Hawkish" Nov/Dec rate hike expectation fell short that was interpreted as Powell's "dovish" stance.
- Implied 150 bps rate cut mismatched the Fed's projection.
- Speculations amplified the "mismatch" during holiday session when traders and fed officials are in the holiday.
- When volume comes back after holiday, markets act to correct.
Technical view:
- DXY still being the triangle, i.e. support found upon its upward trendline
- Short-run key level would be 103, where around a former bottom
- Actual resistance should be 104 when an inverted Head and Shoulder pattern is forming.
- 2023 Sept: Betting one last rate hike (a 4th in year 2023) in Nov/Dec FOMC meeting.
- 2023 Dec: No rate hike in Dec FOMC meeting. Afterwards, expected the Fed to cut in March 2024
What the Fed told us:
- According to the 'dot plot', majority of committee anticipate a 50-100 bps cut by the end of 2024.
- Powell once said the Fed will act if inflation comes back up.
USD movement:
- "Hawkish" Nov/Dec rate hike expectation fell short that was interpreted as Powell's "dovish" stance.
- Implied 150 bps rate cut mismatched the Fed's projection.
- Speculations amplified the "mismatch" during holiday session when traders and fed officials are in the holiday.
- When volume comes back after holiday, markets act to correct.
Technical view:
- DXY still being the triangle, i.e. support found upon its upward trendline
- Short-run key level would be 103, where around a former bottom
- Actual resistance should be 104 when an inverted Head and Shoulder pattern is forming.
Technical view:
- If breaking out the downward trendline, next upside target is gonna be 105.50.
- If breakout not seen, then downside support is at around 102.