Hawkish FED Keeps USD In Uptrend

31 thg 8, 2022

Unfortunately, stock markets are where they are, and we cannot force them to move in a particular direction. We see a neutral status at the end of the summer, but this volatility may come back in September. We may see some interesting price action already this week when US will release its important jobs data. Fed watches this data closely, but what’s important is that they were very clear lately and said that they will stay hawkish even if FED’s actions will cause some harm to the US economy. So for now, the USD remains in uptrend because of US yields.

From an Elliott wave perspective, we see US yields trying to break higher into a fifth wave now, so this can cause even more weakness XXX/USD pairs.

But when the fifth wave will hit a new high on yields, that’s when we should be aware of a new change in cycle, ideally later this year.

But any major reversals in cylce will not happen that easily, especially now with current FEDs actions and potential bad data. Bad or good data; it doesn’t really matter; the stock market will have a hard time turning back to the highs. Yes, stocks can stabilize if we see bad data, but if we will start seeing bad data week after week then this means a big economic slowdown and a potential recession.

Expensive capital, inflation, and economic downturn is a bearish case for stocks. There is simply no "free" cash available to be invested in the stock market.