FOMC economic projections generates major market volatility

FED doves

The Federal Reserve kept interest rates unchanged this week and reiterated a dovish tone towards the US economy and the threat of coming inflation. Market participants reacted as the FED Dot Plots revealed that the United States central bank would not be raising interest rates until 2024. Volatility ramped-up significantly after the FED economic projections were known, with the US dollar moving sharply lower alongside bond yields. The Federal Reserve did raise its growth projections to 6.5 percent, and noted that they hoped European growth would return and that the ongoing vaccine rollout would be smooth. The US dollar started to gain back lost ground as a number of major currencies failed to break past key technical areas against the greenback.

• USDCAD is only bearish while trading below the 1.2500 level, key support is found at the 1.2400 and 1.2280 levels.
• USDCAD is only bullish while trading above the 1.2500 level, buyers may test towards the 1.2530 and 1.2578 resistance levels.

Oil price crash

Oil prices staged a major pullback this week as WTI and Brent incurred losses of close to ten percent due to a number of bearish news developments that came forward. The price WTI oil crashed towards the $58.00 support level after trading around the $65.00 resistance zone for most of the trading week. News that certain key European nations are heading back into lockdown over rising COVID-19 infections triggered the major price decline in the oil market. Other negative factors weighing on the price of oil this week included a building up of oil supply in the United States and a strengthening of the US dollar currency.

• WTI is only bearish while trading below the $63.00 level, key support is found at the $58.00 and $57.00 levels.
• WTI is only bullish while trading above the $63.00 level, buyers may test towards the $64.00 and $65.00 resistance levels.

Buyers return

Bitcoin had a busy week on the cryptocurrency market as the first digital asset fell towards the $53,000 level and then recovered back towards the $60,000 level. News that India was considering a vote on banning cryptocurrencies caused Bitcoin and a number of other top altcoins to falter in early week trading. Bitcoin soon recovered after VISA announced its entry into cryptos and positive news surrounding an institutional offering Morgan Stanley investment bank. The BTCUSD pair also rallied after the FOMC policy decisions as the prospect of ultra-low US interest prompted more interest towards cryptocurrencies.

• The BTCUSD  pair is only bearish while trading below the $56,500 level, key support is found at the $54,500 and $53,000 levels.
• If the BTCUSD pair trades above the $56,500 level, buyers may test towards the $60,000 and $63,000 resistance levels.

BOE unchanged

The British pound took a hit against the US dollar this week after the Bank of England kept interest rates at 0.10 percent and talked down to UK economy. The Bank of England stated that the ongoing economic environment remains extremely uncertain. Traders and innvestors interpreted the comments as being dovish and that the central bank would continue to buy massive amounts of UK bonds. The Bank of England did note that the ongoing vaccine rollout in the United Kingdom was encouraging and that the $1.9 trillion stimulus package from the United States was a positive development. Sterling slumped back towards the 1.3900 level after trading as high as 1.4000 in the aftermath of the FOMC rate decision.

• The GBPUSD is only bullish while trading above the 1.3960 level, key resistance is found at the 1.4000 and 1.4135 levels.
• The GBPUSD is only bearish while trading below the 1.3960 level, key support is located at the 1.3860 and 1.3700 levels.

BOJ change

The Bank of Japan surprised market participants this week as the central bank accounced that they be widening the band on long-term yield tightening. The Bank of Japan said that this was necessary to remain flexible to changing conditions within financial markets. The recent rise in United States bond yields has caused significant market volatility and was seen as the key event which provoked the Bank of Japan’s change. The Japanese yen currency showed only a muted reaction to the unexpected policy change gave back a small portion of its recent strong gains. 

• The USDJPY pair is only bearish while trading below the 108.40 level, key support is found at the 108.00 and 107.60 levels.
• The USDJPY pair is only bullish while trading above the 108.40 level, buyers may test towards the 109.35 and 110.00 resistance levels.