Market Analysis ahead of FOMC - what next for Dollar and Gold?

TigerWit Africa

The market risk tone is moderately off on Wednesday as the dollar index recovers close to 90. Meanwhile, the stock market bled ahead of tonight’s FOMC minutes. China’s ban on crypto weigh on Bitcoin which further plummets below $40,000. 

Market Wrap

The dollar is finding support at 89.7 early on Wednesday. DXY is on course to touch 90. However, the rally is quite shallow and disproportionate with the bond yield rise. The yield continues Monday’s resurgence and danced to 1.66% early in the London session thus putting pressure on Gold which has found strict resistance at 1875. On the other hand, S&P 500 bled below 4100 and has now shed over half of the last week’s recovery. The fear of inflation is back again amid worsening cases of Covid in India and the cold geopolitical tussle between the US/UN/EU and China concerning the human right violation of the minority Uighur tribes in Xingpiang. Also, the Israel-Palestine conflict is becoming a case for investors although the impact has not yet started reflection in the markets.

China bans crypto. Bitcoin bleed again

Bitcoin and the crypto market bled again after China announced a fresh round of crypto ban. Bitcoin quickly plummeted below $40,000 for the first time since 7th February. The premier crypto fought back to stay above $40,000 but the bearish momentum could drag it back below it and stay there before the next consolidation. Ethereum joined the bears after staying strong last week despite the dovish Elon’s comments. The 2nd largest crypto fell below $3,000 and continues to trade around there at the time of writing (10:15 GMT). Meanwhile, Ripple stays within the $1.2-1.8 range, currently dropping toward the lower region at $1.4. Litecoin took the BTC path, hovering fairly above $260.

FOMC Wednesday

Later today, the FOMC meeting minutes will be the focus of the market. The group will most likely comment on the recent surge in retail prices which resulted in a bigger than expected CPI last week. However, the committee is expected to play down on inflation again as fears and doubts continue to grab the market.

DXY technical analysis: will wedge pattern support dollar rise?

The dollar index completed another wedge reversal pattern after declining to 89.7. It looks highly likely that the current bounce would lead to some recovery to 91 or 91.5. However, a lot depends on FOMC today. A hawkish FOMC later today with perhaps a little changed perception on inflation amid the current risk-off environment would trigger an upbeat dollar.

Gold technical analysis – 1875 rejects the bull again

In the last update on Gold, we looked at the possibility of some reactive bearish traction around the 1875 resistance. As the chart above shows, the bears have pushed over 200 pips away from 1875. Are we in for the 4th sub-wave (circled in red)? With the potential of a higher yield and a rising dollar, the yellow metal might hit 1820 this week. However, the dip is expected to be corrective. The long-term bullish trend still appears intact.

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