Analisis Forex & Kajian: 07.06.2021 - Speculative mood is rising...

07.06.2021 01:25 PM

Speculative mood is rising ahead of the results of the Fed meeting

There was an intensified fairly broad debate about the growth of the US inflation last month, in which all high-ranking officials have possibly already participated. However, we have not heard anything sensible until now, except for masterly phrases on the topic of temporary anomalies created by COVID-19.

This time, US Treasury Secretary Janet Yellen managed to stand out, saying that President Joe Biden should push ahead with his $ 4 trillion spending plans, even if they cause inflation to persist next year and higher interest rates.

"If we ended up with a slightly higher interest rate, that would actually be a plus for the public's point of view and the Fed's point of view," Yellen told Bloomberg News on Sunday during her return from a Group of Seven finance ministers' meeting in London.

The Treasury Secretary pointed out in an interview that the interest rate is very low and this level has been maintained for a decade, and the current presidential administration would like the Federal Reserve to return to a normal interest rate environment, which may help to ease the current situation in the economy.

The policy of the current administration is twofold. At the time when Donald Trump was in office, he was condemned for interfering and putting pressure on the Fed regarding interest rates, and now, when there is a direct impact on the Fed, there is no violation or pressure on the regulator.

Everyone builds a policy for themselves and only time will tell who is right. However, the essence of the argument is not that someone is bending their line, but the fact that in a situation with high inflation and the Fed's inaction, statements about monetary policy, particularly the interest rate, can be sharply perceived by speculators in the form of a series of the price surge.

It can be recalled that everyone is waiting for the results of the Fed's meeting in June, which means that information noise may well lead to chaotic price acceleration, just due to speculation amid information noise.

Analysis of the trading chart:

The Euro currency has entered the stage of slowing down the upward cycle since about mid-May, which initially led to amplitude in the range of 1.2160/1.2250 and then to the correction stage. The coefficient of speculative transactions is growing, which is confirmed by the market volumes and structure of price candles, which are more of an impulse type.

Thus, we can say that there will be a change in the upward cycle from 1.1700 to 1.2250, but it should be recalled that all changes may be associated with the speculative influence of market participants ahead of the Fed's June meeting.

In this situation, large players will take a pause until the circumstances regarding the further strategy of the Fed are clarified, while a crowd of speculators will drive the quote depending on the incoming information.

Several possible strategies can be applied depending on the approach and prospects – short-term, medium-term, long-term.

If we are talking about medium-term and long-term planning, it is worth waiting for a while at least until the Fed meeting, wherein some details may appear.

As for the short-term trading, one can follow along with speculators, focusing on the information noise regarding hot topics: Fed strategy, inflation, and interest rate. Information can be identified both from our website and from specialized sources, i.e Bloomberg.

The technical picture in terms of speculation looks quite simple. There are a number of key levels, relative to which there is recently an interaction of market participants with the price.

The breakdown of the coordinate 1.2100 will most likely lead to an increase in the volume of short positions, while the breakdown of 1.2250 will increase the volume of long positions. The nearest area is set at 1.2150/1.2285, which can reinforce one or another border of the main levels.

Indicator analysis

Analyzing different sectors of time frames (TF), it is clear that the indicators of technical instruments have a downward signal to a greater extent, which is confirmed in the market by the movement from the resistance level of 1.2250. The minute time frame clearly reflects the speculative non-stop, having a variable signal.

At the moment, the dynamics is only 25 points, which is due to the cumulative process in the period from 17:00 UTC+00 (06/04/21) to 9:00 UTC +00 (06/07/21).

The completion of the accumulation process will most likely lead to a new round of speculative acceleration in the market.

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