Early morning, the FED raised interest rates by 0.75%, which was the largest rate hike since 1994. However, despite the large rate hike, risk assets have taken a slight turn to the upside and the DXY is facing some selling pressure. Leading into the event, the DXY surged higher as the market priced in the interest rate decision. A clear buy the rumour sell the fact scenario. The Federal Reserve released forecasts showing that the official rate could reach 3.4 per cent by the end of the year and 3.8 per cent next year. “The committee is strongly committed to returning inflation to its 2 per cent objective.” Federal Reserve chairman Jerome Powell said he expected the economy to slow and the unemployment rate to rise in coming months as interest rates increase, noting, “75 basis points seemed like the right thing to do at this meeting, and that’s what we did”. The Fed sees the economy slowing to 1.7 per cent growth this year and the unemployment rate is predicted to rise by 0.5 per cent to 4.1 per cent next year. It is possibly these forecasts and comments that are putting downside pressure on the USD this morning.
With the DXY setting up a technical reversal pattern, we are looking to position on metals which should benefit from a weaker USD.
I am not calling a top in the DXY, however, I am looking for a move into the 104-103 support zone.
Silver Daily Chart
Silver has possibly set up a very similar structure to the reversal back in December 2021. There has been a move into the 61-78% FIB retracement level, a higher low and a bullish turn on the MACD and RSI. We are looking to target the 1.27-1.618% FIB extension area at 23.44-24.13
Trade Setup: BUY market execution, current price 21.67, stop loss 20.87 and take profit 24.10.
Stop loss: 80 pips
Take profit: 243 pips