Situation[1]

As the nation struggled with inflation at 40-year highs, St. Louis Fed President James Bullard cautioned overnight on 28 September that the U.S. faces a "severe inflation problem." His warning is likely a hint at further tightening of monetary policy. Neel Kashkari, president of the Minneapolis Federal Reserve, stated that the central bank had "a lot of tightening in the pipeline."

Their remarks follow the Fed raising interest rates for the fifth time this year and warning that it was prepared to risk economic hardship in its fight against escalating inflation.

The dollar index increased by 0.4% to 114.68, a fresh 20-year high, while dollar index futures also increased[RP1] .* Demand for safe haven assets like the US dollar was also fuelled by a general market collapse in risky assets.

Asian currencies plunged as hawkish remarks from several Fed officials suggested that the region might see additional rate hike pain.

The average prediction is that by the end of 2022, U.S. interest rates will have risen by 300 points to over 4%. [1] If the difference between risky and low-risk yields shrank due to rising U.S. interest rates this year, Asian currencies have fallen precipitously, and as rates rise, the region will likely experience even more suffering.

Technical view

US 500

After a recovery rally failed during regular trading hours and the S&P 500 set a new intraday low for the year, stock futures declined on Wednesday morning, 28 September.

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Chart 1: S&P 500 performance for the last 5 years (Source: TradingView[RP2] )

Stocks gave up a sizable early gain during Tuesday's session, 27 September, as the S&P 500 dropped below its intraday low from June, which served as the previous market bottom. The Dow and S&P 500 both ended the day negative for the sixth day in a row, but the Nasdaq Composite gained 0.25%. All three of the major averages are currently in a bear market.

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Chart 2: S&P 500 performance for the last 12 months (Source: TradingView)

“I think we’re certainly not at the end of the road in terms of pricing in the full recessionary outcome. …[2] We really need to get to dirt cheap valuations on equities, and we’re not quite there yet,” Anastasia Amoroso, chief investment strategist at iCapital, said on Tuesday’s “Closing Bell.”[2]

As we can see on Chart 2, Fibonacci extension indicates that if the price breaks through the support zone, the next target is 1,618 Fibonacci - the zone around 2,920 points.

Bitcoin

In the last 5 years, price of Bitcoin skyrocketed and retreated few times. We can see it on the Chart 3[RP3] .

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Chart 3: BTCUSD value, daily timeframe for the last 5 years (source: tradingview.com)

The price reached almost 0.886 Fibonacci from the first wave, which should be strong support since it’s zone from 2018 highs. However, if we check the last wave (orange colour) the initial price was already breached down, and it is going towards 1.618 Fibonacci at 5 822.59 USD.

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Chart 4: BTCUSD value, daily timeframe for the last 5 years (source: tradingview.com)

Looks like there is another leg forming right now, thanks to FED hawkish news. Still, the big psychologic border will be 10 000 USD price and zone around it. If it will be breached, then the price could spike down to 1.681 Fibonacci, and that slowly move upwards for the next few years. [3]

Disclaimer:

The content of this material constitutes marketing communication and should not be considered as any type of investment advice and/or investment research and/or a solicitation for any transactions. This material was prepared for informational/educational purposes only and does not imply an obligation to perform investment transactions nor does it guarantee or predict future performance. BCM Begin Capital Markets Cy Ltd and its relevant persons including affiliates, agents, directors, or employees do not guarantee the accuracy, validity, timeliness, or completeness of any information/data provided by third parties and assume no liability for any loss arising from any investment made based on the said information/data.

Overview report prepared by Jozo Perić, Head of Portfolio Management Department and Investment Research Department

[1-3] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.

*Past performance is no guarantee of future results.

[1] Combination of news from Reuters and Bloomberg

[2] Source: CNBC

 [RP1]Please add the chart reflecting the development of the price of dollar for the preciding 5 years.

 [RP2]Chart should reflect the development over the last 5 years, i.e. from October 17 to October 22

 [RP3]Chart should reflect the development over the last 5 years, i.e. from October 17 to October 22