After the FOMC, the USD spikes and the SPX and Nasdaq decline.

VOT Research Desk

Nov 3

Market Analytics and Considerations

Talking Heads FOR USD, INDICES:

The FOMC raised interest rates by another 75 basis points today. Initial reactions were USD-negative and equity-positive, but during Chair Powell’s press appearance, those responses were reversed.

Now that the FOMC meeting is over, attention is turning to Friday’s NFP report, and considering that it was recently released, Fed Farmed is another important factor that will influence market pricing. This is applicable to all sides of the argument.

A further 75 basis point increase from the Fed, and the initial response was risk-positive due to some minor revisions in the statement that discussed “total combined” rate hikes and the lag in transmission mechanism. Some traders interpreted this softening to suggest that the Fed might be more forceful when they say they’re considering slower rate increases.

This continued for the first ten minutes of the news conference until Chair Powell stepped out and said, “It’s early to talk about stopping.” This was backed by a slew of slightly aggressive remarks that quashed any notion that the bank might be getting close to any potential policy transitions.

The USD quickly recovered its strength, and equities started to turn. All three US market indices are currently lower on the day as the gains that had been made following the release of the remarks were swiftly reversed.

S&P 500

Often watched for potential negative reversals, the ascending wedge pattern that provided support for the S&P 500 has now been shattered. The price has moved all the way down to the next support, which is a short-term area around 3777, after trading through the adequate support, which was in the range of 3802-3820.3750 is next critical area of support, and the 3802-3820 range is now potentially resistant ground.

NASDAQ

The Nasdaq was the least resilient of the three main US indices, as we had noted this morning, and given how interest rate fragile the tech-heavy index is, the Nasdaq is made slightly more vulnerable by the Fed’s more aggressive outlook.

The psychological level of 11k, which served as support on several occasions while prices were grinding in that region in late October, has already been broken by the Nasdaq. 10,890 is our next level of support, and 10,767 is the one below that. The recent low is at 10,501, a long-term Fibonacci level that was our initial objective for the Top Trade for Q4, if/when sellers can take that out or test that level.

SHORTER-TERM NASDAQ

There are now a couple areas of former support that could now act as resistance for the Nasdaq. The zone between 11,068 and 11,091 stands out, and above that, 11,229, has had several intonations, even during the press briefing, and this is still noteworthy.

USD

In the early stages of today’s rate announcement, the US dollar appeared to be under pressure. Yesterday, the DXY immediately scaled back up to an important area of resistance that had served as the top for the double top pattern the previous week.

The DXY rebounded after the release of the statement but it wasn’t until just over six minutes into the news conference that a bottom was established and the USD started to rise. And since, that trend has persisted, and the US dollar is currently trading at a brand-new weekly peak.

Longer-Term USD

We’ll probably necessitate a more aggressive negative trend in EUR/USD if we’re going to witness a re-test of the USD peak levels. The 113.92 mark, which established the double top, is a significant point of resistance above for the Euro, which is 57.6% of the DXY. A notable source of shorter-term resistance along the trip is located above at 112.56.

Technical (Indices) View – SMA

Pivots – daily