Daily Analysis: Markets Calm Down after Slightly Hawkish Fed Statement

Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2832 0.39%
DAX 13,189 -0.08%
WTI Crude Oil 65.02 1.83%
GOLD 1348.00 0.44%
Bitcoin 10,049 -0.82%
EUR/USD 1.2417 0.12%

Financial markets were choppy throughout the day, as it is usual on Fed days, as the correction of the last couple of days dominated sentiment among investors. As Janet Yellen had her last FOMC meeting as Fed Chair, traders were paying close attention to the final message of this term’s committee. The rate decision was not really a question this time around, as no analysts expected a rate hike or a change in the tapering schedule of the central bank.

The statement was mostly in line with expectations, but the optimistic view on inflation and growth triggered a muted rally in the Dollar. The Greenback remained close to its recent multi-year low despite the bounce, with the EUR/USD closing above the 1.24 level.

EUR/USD, 4-Hour Chart Analysis

Equities were drifting slightly lower during the US session, before the Fed, and turned volatile after the release, but the major indices ended the day well off their lows, as the market settled down. The Volatility Index (VIX) retreated significantly, as investors removed their Fed-related hedges, and that helped the late-day rally too.

S&P 500 Futures, 4-Hour Chart Analysis

On a negative note, small caps finished the session showing clear relative weakness, and that coupled with the persistent weakness in Asian and European stocks, points to the continuation of the correction.

Commodities also had a choppy, but ultimately positive day with especially crude oil experiencing wild swings after the release of the mixed US inventory data. The WTI contract ended the day near the $65 per barrel after dipping below $64 previously. Gold has been trading sideways for most of the day, but the precious metal closed just off the $1350 level, not far below the recent 14-month high.

Gold Futures, 4-Hour Chart Analysis

Cryptocurrencies

The crypto segment had a mixed session, which was already more than yesterday’s sell-off promised, as the major coins all held up above the crash lows from early January, and attempted a rally, which carried BTC back above $10,000. Bitcoin failed to gain significant ground North of the historical price level, and the most valuable coin is still hovering around that zone, while the declining trend is still clearly intact.

BTC/USD, 4-Hour Chart Analysis

Altcoins are following BTC’s movement very closely yet again, as correlations are high across the board, with only Ethereum and Stellar showing distinct relative strength. ETH is well above the $1000 support, despite yesterday’s trend break, while being miles above the crash lows near the $740 level.

While we expect the coin to fall below the correction lows before the end of the cycle, there are clear signs of accumulation in the token’s market, and that might have significant long-term implications, with a possible further tightening of the gap between the market values of BTC and ETH in the coming months.

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Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.