Federal Reserve’s Dilemma for Hiking Rates or Opting for a Pause Amidst Debt Ceiling Resolution

My FX List
June 2, 2023

Table of Contents

Bearish View

  • Take Profit : 26,000
  • Stop Loss: 27,600
  • Timeline: 1 day

Bullish View

  • Buy Stop: 27,475
  • Take Profit: 28,500
  • Stop Loss: 26,000

Following the resolution reached between Kevin McCarthy and Joe Biden, the United States is now making progress in addressing the recent concerns surrounding the debt ceiling. While the agreement is still encountering a few remaining obstacles on its path to becoming law, it brings a glimmer of positivity. As a result, we have witnessed a surge in the US dollar index, accompanied by a retreat in the Dow Jones, S&P 500, and Nasdaq 100 indices. These three major indices experienced declines exceeding 0.30%. In a similar vein, other global indices like the German DAX and French CAC 40 also took a hit, dropping over 1% on Wednesday.

Looking ahead, the forthcoming mid-month meeting of the Federal Reserve is raising significant concerns. Market analysts are anticipating a 0.25% interest rate hike by the central bank in June. Loretta Mester believes that the bank should maintain its course of raising rates, citing persistent high inflation as a key driver. Nevertheless, some officials within the Federal Reserve advocate for a pause during the upcoming meeting. Vice Chair Philip Jefferson suggests a cautious approach, favoring observation of inflation trends before making further decisions.

Amidst ongoing concerns about the global economy, the BTC/USD pair experienced a decline. In terms of technical analysis, the BTC/USD pair retraced to a low of 26,852, marking its lowest point since May 28. With this drop, the pair moved below the critical support level at 27,475, which had been the highest point observed on May 23rd and May 18. Additionally, the pair slightly dipped below the 50-period moving average, accompanied by the MACD histogram moving below the neutral point. Consequently, the pair is expected to continue its downward trajectory, with the next significant level of interest being around 26,000. To manage risk in this bearish scenario, setting a stop-loss at 27,475 would be prudent.

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