<p style=““ class=“text-align-justify“>The dot plots revealed that the Fed was seeing a more hawkish outlook for interest rates and it will be interesting to see what is it in the meeting minutes to reveal such sentiment. Especially when we are seeing inflation pressures cool off, not just in the US but also in Europe now. That said, we are still of course a long way from the desired 2% target – it is best to be reminded of that as well.</p><p style=““ class=“text-align-justify“>Besides that, it will be interesting to take a look at what policymakers are feeling about labour market conditions and the economy. And will there be any murmurs from certain quarters that they are worried about potentially overtightening policy? That will be one that risk trades will definitely be scrutinising later today.</p><p style=““ class=“text-align-justify“>The Fed minutes will be released later at 1900 GMT.</p>

This article was written by Justin Low at www.forexlive.com.

<p class=“MsoNormal“>As the Fed came out more
hawkish than expected, the market sold off on higher risks of
overtightening and a worse than expected recession, bringing the Russell 2000 index into focus.</p><p class=“MsoNormal“>Bear Market Headwinds for Broader Market, Russell 2000</p><p class=“MsoNormal“>These are two of the
worst possible things for the stock market and should result in a
continuation of the bear market. The <a target=“_blank“ href=“https://www.forexlive.com/news/china-takes-the-final-step-to-embrace-living-with-covid-20221227/“ target=“_blank“ rel=“follow“>China
reopening news</a> during the Christmas holidays can have two
implications:</p><p class=“MsoListParagraphCxSpFirst“>·
It may help with global growth and reduce the
chances of a hard landing.</p><p class=“MsoListParagraphCxSpLast“>·
Increase inflationary pressures.</p><p class=“MsoNormal“>Both the options though, lead
to the Fed possibly being forced to go higher than their expected terminal rate,
which brings us back to the original risks: overtightening and deep recession.</p><p class=“MsoNormal“>RUSSELL
2000 Technical Analysis</p><p class=“MsoNormal“>In the
daily chart above, we can see how the Russell 2000 price, after falling off a cliff out of
the FOMC meeting, pulled back to the nearest swing low <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a> area at 1788-1798. </p><p class=“MsoNormal“>That looks
like a strong barrier as we saw several tests without successful breaks. If the buyers manage to breach
that level, the next possible upside target may be in the 1880-1900 region. If
the price fails though, the October low at 1642 will be the clear target.</p><p class=“MsoNormal“>In the 1-hour chart above, we
can see more closely the current rangebound price action with a <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a> near the 1800 handle and a
support at 1730. Ideally, you would want to stay out of such a market and
wait for a clear breakout before deciding what to do next. </p><p class=“MsoNormal“>Nevertheless,
one can try to play the Russell 2000 range selling at <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a> and buying at <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>support</a> until the game stops.</p><p class=“MsoNormal“>Drilling down to the 15 minutes
chart, we can see that there’s a <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a> turned <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>support</a> at the moment (orange line). This level should define
where the price may be headed next. In the first scenario, the price may
retest the level and run to the upside testing again the resistance. In the
second scenario, the price breaks down and falls to the support.</p>

This article was written by ForexLive at www.forexlive.com.

<p style=““ class=“text-align-justify“>Not quite the case in its entirety with oil being down by nearly 2% on the day, but it applies to almost everything else in broader markets. Equities are higher with European stocks leading the way, helped out by softer German and French inflation numbers this week. US futures are also slightly higher, so the overall market mood today is keeping steadier.</p><p style=““ class=“text-align-justify“>Meanwhile, bonds are also continuing their good form as a result with 10-year Treasury yields down to 3.70% from the open at around 3.83% yesterday. In Europe, 10-year German bund yields are down to 2.31% and that is a far cry from the peak at the end of last week at 2.56%.</p><p style=““ class=“text-align-justify“>As for the dollar, it is down across the board with some of the losses outpacing the gains from yesterday among major currencies. EUR/USD is up 0.8% to 1.0630 with GBP/USD up 0.9% to 1.2070 and pushing past its 200-day moving average, seen at 1.2027. USD/JPY is also being pinned lower by 0.5% to 130.30 levels after running into another test of 130.00 at the start of the session.</p><p style=““ class=“text-align-justify“>But the standout performer is the aussie, which is up by over 2% against the dollar with buyers pushing for a technical break as outlined earlier <a target=“_blank“ href=“https://www.forexlive.com/news/audusd-up-over-2-as-dollar-fumbles-after-yesterdays-hot-start-20230104/“ target=“_blank“ rel=“follow“>here</a>.</p>

This article was written by Justin Low at www.forexlive.com.