Traders Revise Their Anticipations Regarding Federal Reserve Actions

Between the commencement of November and the culmination of December 2023, the price of dollar index futures exhibited a decline of approximately 5.5%, as reported by the CME exchange.

FXOPEN

This depreciation in the USD stemmed from traders’ expectations of a forthcoming interest rate reduction by the Federal Reserve in March. Consequently, the prevailing sentiment at the conclusion of 2023 ushered in an upswing in stock indices, with gold reaching a historic peak on December 4, and an increase in the value of cryptocurrencies.

However, the advent of 2024 has witnessed a marked shift in sentiment, as evidenced by the dollar index futures price, which surged by more than 1% during the sessions on January 3-4.

This can be construed as follows: 

  • During the pre-holiday period, there existed a discernible emotional element that fostered an optimistic outlook for the future. 
  • Following the conclusion of the holidays, market participants realigned their expectations concerning the Federal Reserve’s inclination towards policy easing.

Data released yesterday indicated that there is no unequivocal indication of the Federal Reserve contemplating rate reductions, as its members continue to perceive the necessity for maintaining a restrictive policy stance for an extended duration.

In the initial days of 2024, there was a correction of the bullish sentiment that prevailed at the conclusion of 2023. In the cryptocurrency market, known for its pronounced margin trading activity (involving the use of borrowed capital to initiate positions), this correction escalated into a cascade of selling, causing the BTC/USD exchange rate to plummet swiftly to the $41,000 mark. This decline constituted a deceptive bullish breakout from the consolidation zone observed at the end of 2023.

Additionally, it’s worth highlighting the downturn in the NASDAQ technology stock index. As reported by Bloomberg, this index has exhibited its poorest performance at the outset of the year since 2001, a period notable for the dot-com crash.

The NASDAQ-100 chart shows that:

→ the stock index price is still within the uptrend (shown in blue);

→ the price was within the intermediate correction (shown in red), forming a flag pattern;

→ the psychological level of 17,000 served as resistance.

The price may be supported by:

→ the psychological level of 16,000, which was broken by the bulls after some consolidation in the second half of December;

→ the median line of the ascending channel;

→ a level of 50% of the A-B growth impulse, located around the level of 15,500.

The NASDAQ-100 chart analysis reveals the following key aspects: 

  • The stock index’s price remains within the established uptrend, as denoted by the blue trendline. 
  • It has recently undergone an intermediate correction, represented in red, forming a flag pattern. 
  • The psychological resistance level at 17,000 has proven to be a significant resistance.

Potential support factors include: 

  • The psychological support level of 16,000, which was breached by bullish activity following a period of consolidation in the latter part of December. 
  • The median line within the ascending channel. 
  • A retracement level of 50% from the A-B growth impulse, situated approximately at the 15,500 mark.

Observing the price action in proximity to these levels, should they be attained, will furnish us with valuable insights into the extent of sentiment shift subsequent to the bullish conclusion of 2023.

FXOpen offers spreads from 0.0 pips and commissions from $1.50 per lot. Enjoy trading on MT4, MT5, TickTrader or TradingView trading platforms!

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Disclaimer: the subject matter and the content of this article are solely the views of the author. FinanceFeeds does not bear any legal responsibility for the content of this article and they do not reflect the viewpoint of FinanceFeeds or its editorial staff.

 

  • Read this next

    Fintech

    Duco launches EMIR-compliant transaction reporting eligibility validator

    “With Duco’s transaction reporting eligibility validator, customers can run independent checks whenever they want, get results in minutes, and access a clear audit trail. The solution provides insights at a field-by-field level so clients can see specific issues, discuss, and show ESMA they are considering discrepancies at a deep level.”

    Digital Assets

    Bybit’s trading volume near all-time high ahead of Bitcoin halving

    “Now, we’re seeing large inflows and smart money is moving fast. With the Bitcoin halving just around the corner, Bitcoin is proving itself as an institutional asset, a hedge against economic uncertainty, and a vote for financial freedom.”

    Digital Assets

    Morgan Stanley to add spot bitcoin ETFs

    Morgan Stanley is reportedly considering adding spot bitcoin ETF products to its brokerage platform. This move comes after the Securities and Exchange Commission (SEC) approved the investment vehicle in January.

    Digital Assets

    Hong Kong ends license applications for crypto exchanges

    Hong Kong has officially ceased accepting license applications from cryptocurrency exchanges as of February 29, signaling a stringent regulatory shift.

    Fintech

    Volt secures EMI license, expands payment solutions in UK

    Volt has successfully obtained an Electronic Money Institution (EMI) license from the UK’s Financial Conduct Authority (FCA).

    Retail FX

    ASIC bankrupts finfluencer Tyson Scholz over stock tips

    The Australian Securities and Investments Commission (ASIC) has effectively bankrupted Tyson Robert Scholz, the figure behind “Black Wolf Pit.” The action marks a significant crackdown on so-called ‘finfluencers’ and individuals providing unlicensed financial services.

    Digital Assets

    Green Bitcoin Presale Raises $1M as Bitcoin Approaches its ATH

    The eco-friendly crypto project Green Bitcoin has seen its limited-time presale phase cross $1 million in funding. With an innovative gamified staking model and energy-efficient foundation, Green Bitcoin offers token holders a way to stake their tokens and generate yield.

    Web3

    Introducing QuickNode Streams: Elevating Blockchain Data Management

    Discover QuickNode’s Latest Innovation: Streamlining Blockchain Data Streaming for Enhanced Efficiency and Accessibility. Explore the Future of Blockchain Technology with Streams.

    Industry News

    John Oliver rips into MetaTrader over role in ‘Pig Butchering’ scams

    “If your friend told you to download an app, and you saw it in the app store with good reviews, you might assume everything on it was legitimate. In before, you saw MetaTrader’s logo which looks like three men in suits jerking each other off under a table – an appropriate metaphor for cryptocurrency if I have ever seen one,” Oliver quipped.

    <