Yesterday, the Fed left interest rates unchanged at
5.25-5.50% as expected but revised its outlook on the more hawkish side. In
fact, the Fed not only sees another rate hike by the end of the year but also
much less rate cuts in 2024 as they revised it from 4.6% seen in June to 5.1%
now. The macroeconomic projections were also revised higher indicating a
resilient economy. In the press conference Fed Chair Powell
reaffirmed their data dependency and the need to move carefully as they
approach the terminal rate. One thing that caught everyone by surprise is when
asked if he would call the soft landing a baseline expectation now, Powell said
„No, I would not do that“.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite eventually broke out of the consolidation following the FOMC meeting
and it’s now eyeing the key support at 13174
where we have also the confluence with the
trendline and the
38.2% Fibonacci retracement level.
This is where the buyers should step in with a defined risk below the level to
position for a rally into the highs. The sellers, on the other hand, will want
to see the price breaking through the level to pile in even more aggressively
and target the 12274 level.

Nasdaq Composite
Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the Nasdaq
Composite basically broke out of the bearish flag. The
target for this pattern is generally the equal extension of the first bearish
leg, so we might even see a break below the key support and a selloff into the
12274 level. For now, the bias remains bearish as the price is printing lower
lows and lower highs with the moving averages being
crossed to the downside.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
optimal level to short was after the breakout of the support. The price has
already moved a lot and it’s never a good idea to chase the market. If the
price pulls back, the sellers should lean on the downward trendline and the
previous low to position for another selloff into the 13174 support. The
buyers, on the other hand, will want to see the price to break above the
trendline to invalidate the bearish setup and start targeting new higher highs.

Upcoming
Events

The week is drawing to a
close, but we still have a couple of key economic releases ahead. Today, the main event will be the US Jobless Claims
report as the labour market data remains very important for the Fed and the
market. Tomorrow, we will see the latest US PMIs data which is expected to be
market moving.

This article was written by FL Contributors at www.forexlive.com.

• That is welcome news
• Previous rate hikes are working but inflation is still not where it needs to be
• There is absolutely no room for complacency
• Will be watching closely to see if further rate hikes will be needed
• Will need to keep rates high enough and long enough to get the job done
• Will do whatever is needed to get inflation back to normal

They’re not shutting the door for another rate hike in November but in all likelihood, they may already be done unless we do see a significant tick higher in inflation in the coming months. And if the UK economy continues to worsen at its current pace, that might just shut the door on the BOE itself before they can even consider any more rate hikes in the near future.

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

The BOE decision to not hike rates today might seem warranted to some extent but it might just end up being a lesson in history if things don’t go their way. The inflation report this week did show signs of slowing inflation but at 6.7%, the UK still sits atop the throne in terms of the inflation ranking among major economies:

*Japan data is an estimate, to be released on 22 September

And the thing to note about all of this is that the BOE is pausing at a time when the economy is beginning to worsen significantly. Yes, that is definitely the prudent step. But when you take into account that markets basically gave them a free pass to sneak in one more rate hike today, it could end up being an opportunity missed for the central bank.

I mean if Q4 conditions end up being as bad or worse than Q3, the argument for a rate hike in November might look like a poor reflection of how the BOE is managing their policy settings. And if that is the case, they risk overtightening into a rapidly declining economy and could just send it over the edge and bringing about a hard landing.

To keep things short, this was perhaps the last chance that the BOE might get to tighten policy further and they did not take it.

And so, therein lies the risks of stagflation in the UK economy with Bailey & co. maybe having no ways of resolving that situation.

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