February 7, 2023

What To Take Away From Powell's Remarks

Frank Cabibi

Today, Fed chairman Jerome Powell spoke on the labor market and inflation. While we don't know what the future holds for the equities and currency market, we can derive certain conclusions from investors' interpretations. Here are some powerful takeaways from Powell's remarks this afternoon.

Key takeaways

  • Jobs are at maximum capacity or even beyond that
  • Economy and labor market are strong
  • Inflation is not expected to hit 2% until at least next year
  • Fed is still pulling out of stock market

Market Impact

This caused the dollar and equities to move with tremendous volatility. Without establishing a clear direction for either asset, the sheer volume of trades sent prices and investors into a frenzy. What was initially taken as optimistic in the stock market later turned sour as the speech went on. Now it seems that the dollar is beginning to lose value again as stocks rise.

Some conclusions investors came to is that they are relieved to see an end in sight on inflation. Powell stated that the rate could come down close to the 2% target by next year. Because stocks are forward-looking, investors likely took this as a green light to begin buying again.

At the same time though, it also gives the Fed a green light to continue raising rates. Higher interest tends to help the dollar and hurts stocks. If investors are able to look past the fact that borrowing costs will get higher, then stocks may rise too.

The Fed has turned from 75 to 50 to 25 percentage point rate hikes. A less aggressive grip on monetary policy is optimistic for the bulls. Inflation has gone from 9.1% in June 2022 to 6.5% in February 2023. Inflation topping out is another optimistic sign.

Decision Points

SPX500 bounced around for a few hours but seems to be more bullish now. If price closes above this falling trend line on the 4H, it might have confirmed the next leg up towards the $4180s. Support lies on the 200 SMA and the trend lines that previously captured price in the wedge.

Similarly, DXY (dollar index) is nearing the top of a trend line on the 4H timeframe. If price gets rejected here, it may confirm that we have entered bullishness on risk-on assets. But if we see a break above, we might see a continuation of dollar bullishness for the time being.

A1 Edgefinder

Watchlist
Save time looking for setups with the EdgeFinder's watchlist! In a glance, see the EdgeFinder's current top buys and top sells.

10% off code: 'READER'

Access Now

Free

Trading Plan Template
Struggling to build a successful trading plan? Download our template to get started today!
Download
Smart Money Likes USD and Gold

As of 9:10 am EST, the 10-Year bond rate is up ~3.50% while the dollar index remains flat. Some big news coming up in the next 24 hours for the USD, EUR and AUD. US consumer confidence is expected to fall from the last reading. We received a strange signal from the EdgeFinder that could […]

Read More
Why Gold Is Going Over $2000

This week, we have seen a lot of market swings in sentiment along with uncertainty around economic stability. Because of this mixed mindset, investors have been shifting their interest towards gold. This article will cover why gold could continue to move higher. Medium to high impact news is coming up for all currencies such as […]

Read More
Major Moves Ahead For USD

There are some major news ahead for the EUR, CAD, AUD and USD pairs this week. Wednesday will be another Fed rate decision forecasted to be another 25 bp. Here are some events set to come out tomorrow: EdgeFinder Analysis UC is still the EdgeFinder's favorite buy score along with USDZAR at +7. Retail is […]

Read More
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
Home
Edgefinder
VIP
Menu
homesmartphonelaptopmenu linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram