Crypto Markets Brace For Impact As FOMC Minutes Signal Fed’s Caution

Cryptocurrency

Summary:

Crypto markets are preparing for further volatility as the likelihood of a rate cut by the US Federal Reserve shortly has begun to diminish.

Crypto markets are bracing for larger volatility in the financial sphere as the chances of the US Fed cutting rates soon have started to fade. The minutes of the meeting released on Wednesday showed that the Fed

was still cautioned about its approach toward rate cuts. The minutes of the meeting also strengthened the rather fact that rates will stay for longer, just as the economic data in the country had indicated.

Fed Stays Cautioned on Rate Cut Trajectory

According to minutes from the Federal Reserve’s most recent meeting, officials stated that they were cautiously optimistic about inflation and that they were not in a rush to lower interest rates. The decision arose after officials chose to maintain the current level of their benchmark overnight borrowing rate and revised the statement issued after the meeting to say that no rate reduction would occur until the Federal Open Market Committee (FOMC), which sets interest rates, had “greater confidence” that inflation was declining.

Fed’s Stance Dulls Optimism about the March Meeting

Fed’s decision to push back rate cuts has taken away all optimism from the upcoming meetings. According to the CME FedWatch Tool, markets are pricing in a 93.5% chance that the Fed will not lower its interest rate in its next March meeting. This comes as an overall hit as since last December, the hopes of the rate cuts happening as early as March had bolstered significantly. However, the Fed’s March meeting will be highly important to take clarity on how the Fed might be viewing the economy then.

But on the brighter side, the minutes of the meeting also showed that the Fed’s policies have proven to be successful overall in the overall economic run. JP Morgan Asset Management global market strategist Gabriela Santos in an interview with Yahoo Finance further asserted that a rate cut might take place in June. “We think [the Fed will] wait until June to be able to garner more of a trend,” he says.

Crypto Markets to Brace for Impact While Digesting Fed’s Stance

Historically, the Federal Reserve’s rate decisions have been a vital resource for investors when assessing assets. Lower interest rates frequently devalue government securities, which increases the attraction of assets like cryptocurrencies. Crypto markets are presently preparing for turbulence due to the possibility that investors would continue with traditional assets for some time in light of the Fed’s decision to postpone rate reduction.

On the plus side, though, a strong economy also maintains investor demand. Positive economies tend to have a stable purchasing power and a desire for riskier assets. In such a scenario, regardless of the Fed’s rate decision, cryptocurrency markets might probably maintain their upward pace.

Source：CoinGape

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Chandan Gupta

Traders' Opinions

Stocks

The Nasdaq 100 took a slight tumble early on Tuesday, slipping below the 20-day EMA. What’s the scoop? Likely just profit-taking antics as the market juggles various speculations about the Federal Reserve's moves.

On Wall Street, it's almost like a mantra: "Pay attention to the Federal Reserve." That sentiment hasn't wavered. Caution is the name of the game, but hey, we're still riding that uptrend, and it seems like that won't be changing anytime soon. Good news, right? Short-term pullbacks are viewed as shopping opportunities by market players.

Fun fact: Canadian CPI came in lower than expected. Will folks try to read the Canadian tea leaves for insights into the U.S. situation? Only time will tell. The support bench is strong, especially around 16,950 and the 50-day EMA. No hesitation in considering a dip buy here. NASDAQ 100 Initiates the Week with a Downward Spiral_1

NASDAQ 100 Initiates the Week with a Downward Spiral_1

But wait, there's more. Nvidia's got an earnings call on Wednesday, and that's causing a bit of a stir. If Tuesday's candlestick breaks its own record, it's a bullish signal, possibly paving the way to the $18,000 level.

In the Nasdaq 100 world, I'm not parting with my stocks. It's either me watching from the sidelines or snagging dips with bounce potential. Cheap contracts are on the horizon – just waiting for buyers to pounce. It's a market with some spin, but buyers seem ready for the dance. NASDAQ 100 Initiates the Week with a Downward Spiral_2

NASDAQ 100 Initiates the Week with a Downward Spiral_2

Nvidia, the superhero of the mega tech world, is gearing up for its fiscal fourth-quarter results. Hold on to your hats! Concerns about its sky-high valuation are circulating, given the whopping 230% surge in the past year. The stock took a modest 3% slide on Wednesday, but can Nvidia be the knight in shining armor for a market in need of a boost?

Quincy Krosby, the maestro from LPL Financial, wonders if Nvidia can be the catalyst the market craves. Interest rate cut hopes have taken a nosedive, leaving earnings and guidance as the market's next big hopes. The market's hunger is real, and Nvidia, the superstar, could deliver the goods – or will it?

So, as we brace for Nvidia's grand reveal, the market sits in anticipation. Will it be a game-changer, or will the mega tech superstar leave us wanting more? Only time, and Nvidia's earnings, will unveil the next chapter in this market saga. NASDAQ 100 Initiates the Week with a Downward Spiral_3

NASDAQ 100 Initiates the Week with a Downward Spiral_3

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Chandan Gupta

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Commodity

Observing the WTI grade of crude oil, we've noticed a slight dip followed by a resilient rebound, showcasing vitality in the market. Notably, the 200-day EMA stands out as a crucial signal, drawing the attention of many observers, as it attempts to offer support.

Even with minor market declines, buyers continue to be attracted to this commodity due to its perceived value. I anticipate the WTI grade, and the broader crude oil market, could reach $82.50 and potentially $88, provided we break beyond the $80 threshold. The inclusion of the 50-day EMA in this analysis adds an extra layer of potential support. Given its widespread use as a technical signal, focusing on this region seems logical and is certainly an area I'll be closely monitoring due to its significance. Bullish Momentum Persists in Crude Oil Market as Prices Sustain Upward Pressure_1

Bullish Momentum Persists in Crude Oil Market as Prices Sustain Upward Pressure_1

Shifting the focus to Brent, it maintains a bullish stance, encountering resistance around the $84 level while finding support from the 200-day EMA. I foresee a potential rise to the $90 level if we successfully surpass the current resistance. Identifying a short-term floor at the $80 level, where the 50-day EMA continues to offer support, adds another layer to this positive outlook. In my opinion, both these indicators are poised to develop rounded bottoms and shift upward.

With summer approaching and an uptick in travel, driving, and flying activities, crude oil is benefiting from seasonal trends. Historically, this time of the year tends to be favorable for crude oil, and current market conditions align with this pattern.

Considering all these factors, signs point toward an upward trajectory in prices. In a market where supply is gradually decreasing, temporary declines could present lucrative buying opportunities. This aligns with the current narrative, and traders are keenly observing the potential impact of global central banks' rate cuts on economic activity. If this scenario unfolds, we might witness a surge in commodities, with oil, typically, taking the lead. While I maintain a bullish outlook, I acknowledge that there is still work to be done, and the market remains dynamic and somewhat noisy.

In essence, the current landscape suggests a promising outlook for crude oil, with both WTI and Brent showing signs of resilience and potential upward movements. The interplay of technical indicators, seasonal trends, and broader economic factors contributes to a positive narrative. As we navigate this landscape, it's crucial to stay vigilant and adaptable, considering both the opportunities and challenges that may arise in the ever-evolving world of crude oil trading.

Today's global oil market, prices took a dip during European trade, marking the second consecutive session of losses after reaching three-week highs. The culprit? Ongoing profit-taking, as investors exercise caution in the face of uncertainties, especially with the imminent release of the Federal Reserve's meeting minutes, expected to offer crucial insights into the future of interest rates.

US crude experienced a 1% fall, settling at $76.35 a barrel, while Brent wasn't far behind, shedding 0.95% to reach $81.69 a barrel, despite touching a session-high at $82.70. This retracement follows a 1.3% loss for US crude and a 1.1% dip for Brent on Tuesday, breaking a four-day winning streak due to profit-taking from the recent three-week highs.

The Federal Reserve remains a focal point for global markets, with investors eagerly awaiting the minutes from the latest policy meeting. The big question on everyone's mind is the trajectory of US interest rates in the coming months. In January, the Fed opted to keep rates steady at 5.5%, and now, as the minutes are anticipated, the financial world is on edge.

Market speculation is brewing, with current odds suggesting a 6.5% likelihood of a 0.25% interest rate cut by the Federal Reserve in March. Looking ahead, the chances increase to 36% for a cut in May, reaching a notable 78% likelihood for a cut in June. The anticipation is palpable, as these potential shifts in interest rates could significantly influence global financial dynamics.

Adding to the mix, traders are eagerly awaiting the release of initial data on US crude stocks by the American Petroleum Institute later today. Projections indicate that this data will reveal a buildup for the third consecutive week, providing further insight into the supply and demand dynamics influencing oil prices. Bullish Momentum Persists in Crude Oil Market as Prices Sustain Upward Pressure_2

Bullish Momentum Persists in Crude Oil Market as Prices Sustain Upward Pressure_2

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Zi Cheng

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Commodity

Fundamental Analysis

On Wednesday, the West Texas Intermediate oil price continues to hover around $77.5 per barrel during United States trading hours. This consolidation in crude oil prices is driven by escalating market caution, fueled by diminishing hopes for imminent interest rate cuts across the globe. The anticipated rise in borrowing expenses is poised to suppress global economic momentum, thereby decreasing the demand for oil.

Furthermore, heightened geopolitical tensions in the Middle East raise apprehensions regarding potential supply disruptions, prompting investors to pay increased premiums for futures contracts as a safeguard against possible shocks in supply. Consequently, oil companies are choosing to sell crude oil in the current period rather than storing it for future months.

Minutes from the Federal Reserve's January monetary policy meeting, scheduled for release at 1900 GMT, will provide further insights into the potential timing of interest rate cuts.

Despite this, ongoing Houthi attacks on commercial vessels in the Red Sea and Bab al-Mandab strait continue to raise concerns about the flow of freight through this crucial waterway. Drone and missile strikes have targeted at least four vessels since last Friday.

Additionally, on Tuesday, Washington once again vetoed a draft resolution at the United Nations Security Council regarding the Israel-Hamas conflict, rejecting a call for an immediate humanitarian ceasefire. Instead, the U.S. is advocating for a ceasefire conditional upon the release of Israeli hostages by Hamas.

Technical Analysis

WTI has been moving in a bullish market structure and closed above the 200 Day Moving Average countless of times. Although it has closed above the 200 Day Moving Average many times but buyers failed to keep price to move higher and move away from the 200 Day Moving Average. When price is very near to the 200 Day Moving Average, it indicates that the price is consolidating which is what WTI is doing currently.

Besides that, the WTI channel is getting smaller and smaller which means a break out could be happening soon for WTI, either breaking out higher or breaking out lower. I will not seek for any opportunities yet until it has broken out of the range as I am not a range trader I prefer to catch trending moves.

Lets anticipate for the upcoming Fed minutes if it would act as a catalyst to push WTI higher or lower.

WTI Trades Around 77.50 Due To Uncertainty On Oil Demand_1

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Ukadike Micheal

Forex

Economic

European consumer confidence experienced an uplift this month, fueled by a drop in inflation and a record-low unemployment rate, according to the EU's monthly survey of households. The European Commission reported a 0.6-point increase in its flash estimate of the consumer confidence indicator for the eurozone, reaching minus 15.5, slightly surpassing economists' forecast of a 0.5-point rise in a Reuters poll. Although rebounding from the nadir of minus 29.7 in September 2022 during the energy crisis triggered by Russia's invasion of Ukraine, the indicator remains below the long-term average of minus 11.

Despite the positive momentum, the consumer confidence indicator's February 2024 reading of -15.5 in the eurozone and -15.8 in the EU indicates that confidence still lingers below the long-term average. The improvement by 0.4 percentage points in the EU and 0.6 points in the eurozone suggests a gradual recovery but underscores the ongoing challenges in reaching pre-crisis confidence levels.

From a technical standpoint, the link between consumer confidence, inflation, and unemployment is a critical aspect to analyze. The improved confidence is likely influenced by the recent decline in inflation, indicating that consumers feel a reprieve from rising prices. Additionally, the record-low unemployment rate plays a pivotal role, as job security is often a significant factor in shaping consumer sentiment.

However, the consumer confidence level's sustained position below the long-term average signals a lingering cautiousness among consumers. This hesitancy may stem from residual economic uncertainties, including the geopolitical landscape, global supply chain issues, and potential aftershocks from past crises. A deeper analysis of the components contributing to the consumer confidence index can provide insights into the specific factors influencing consumer sentiment.

The brightening of European consumer confidence offers a glimpse of optimism, aligning with the decline in inflation and the record-low unemployment rate. Yet, the cautious positioning below the long-term average suggests that a complete restoration of pre-crisis confidence remains a gradual process. Understanding the intricate dynamics between economic indicators is crucial for policymakers and businesses alike as they navigate the evolving landscape of consumer behavior. As the region inches towards economic recovery, the journey to rebuild consumer confidence continues, shaped by a delicate interplay of economic factors and global events.

Source: Financial Times

To stay updated on all economic events of today, please check out our Economic calendar

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Zi Cheng

Traders' Opinions

Forex

Economic

The latest data continues to indicate a robust performance by the US economy, with projections of a 3% growth rate this quarter, a historically tight labor market, and consistently high inflation figures.

As such, there haven't been significant changes on the macroeconomic front, suggesting that the recent decline in the dollar might be nothing more than a temporary setback within a broader uptrend, supported by the strong performance of the US economy compared to the rest of the world.

Technical recessions in the UK and Japan, stagnant growth in the Eurozone, and challenges in China's property sector all emphasize the US dollar's status as the most stable option amidst global economic uncertainties.

The release of the minutes from the most recent Fed meeting later today presents an opportunity for the dollar to regain ground.

US Dollar Slows Down As Fed Minutes Ahead_1

Since the meeting took place, Fed officials have emphasized the importance of patience regarding interest rates. They have highlighted the strength of the US economy and cautioned against premature rate cuts, which could elevate the risk of entrenched inflation.

Recent data releases have supported this stance, as both consumer and producer prices in January surpassed expectations.

At the time of the Fed meeting, officials were not privy to this data. However, it's common for the minutes to be adjusted afterward to emphasize specific points the central bank wishes to communicate.

In this instance, the implied message could be that the US economy's strength may deter the Fed from considering rate cuts in the near term. Such a signal could rejuvenate confidence in the dollar.

For the sixth consecutive session, gold prices are on the rise, benefitting from a declining US dollar, which has seen a significant retreat during this period. A weaker dollar reduces the cost for foreign investors to purchase the dollar-denominated precious metal, thereby increasing its demand.

Today, this upward trend faces a challenge with the release of the FOMC minutes. If the minutes reflect statements from Fed officials advocating against premature rate cuts, there could be a rebound in the US dollar and yields. This, in turn, might have a negative impact on gold, potentially interrupting its current winning streak.

Throughout this year, Nvidia has played a pivotal role in supporting the stock market, making its quarterly earnings report today significant not just for its own stock but also for broader market dynamics. Analysts are optimistic, foreseeing earnings to have surged over 400% compared to the previous year, fueled by the artificial intelligence surge.

Anticipation is high, reflected in the options market, which indicates an expected move of 11% in either direction for Nvidia shares today. Such a substantial move would undoubtedly impact the overall stock market, given Nvidia's increasingly substantial market capitalization.

To stay updated on all economic events of today, please check out our Economic calendar

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Cohen

Economic

The Indian economy is predicted to grow at a rate of 7% in the next fiscal year, according to a report by the finance ministry. This comes after a projected growth of 7.3% for the current fiscal year, marking the third consecutive year of growth exceeding 7%. The optimistic outlook is attributed to a strong performance in Q2 and positive growth projections for FY24.

Numerous global agencies have subsequently revised India's growth projection upwards, highlighting the economy's resilience against global geopolitical challenges. The Interim Union Budget FY25's measures are expected to play a significant role in supporting India's future growth.

The report also anticipates healthy Rabi harvests, sustained manufacturing profitability, and service resilience to bolster economic activity in FY25. Household consumption is projected to improve, and fixed investment prospects look promising due to a boost in private capex cycle, improved business sentiments, healthy bank and corporate balance sheets, and the government's emphasis on capital expenditure.

However, the report also warns of potential challenges arising from geopolitical tensions, volatility in international financial markets, and geoeconomic fragmentation. The global slowdown, particularly among India's major trading partners, has reduced demand for Indian merchandise exports.

Nonetheless, a decrease in the value of imports due to falling international commodity prices has narrowed India's merchandise trade deficit. The report anticipates this, along with rising net services receipts, to improve India's current account deficit.

The strong macroeconomic fundamentals, high growth, and stable business environment have boosted Foreign Portfolio Inflows (FPIs). On the inflation front, pressures eased in January 2024 due to falling food and core inflation.

The government's recent measures to control food prices are expected to further reduce inflation. A normal monsoon forecast and the expected fading of El Nino are likely to result in better-than-normal Kharif sowing.

"With the stable downward movement in core inflation and moderation in food prices, the outlook for a reasonably low headline inflation rate is "

The report also notes a decline in the urban unemployment rate to 6.5% in Q3 of FY24, the lowest since the Periodic Labour Force Survey (PLFS) began. Formal sector employment also demonstrated robust growth, indicated by a sharp increase in the Employees Provident Fund Organisation (EPFO) subscription base.