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Economic Fundamentals tradingeconomics.com
Technical Analysis by Raul Fernando Luna Toro
Fundamentals
During the first monetary policy meeting of 2023, the US Federal Open Market Committee (FOMC) discussed the possibility of increasing the federal funds rate by 25 basis points. According to the previous minutes meeting, nearly all FOMC members believed that such a rate hike was appropriate.
Nonetheless, a minority of officials advocated for a more aggressive 50 basis point increase. Moreover, based on the recent action in the bond market, it appears that a 50 basis point increase is becoming more likely.
Furthermore, all participants reached a consensus that additional rate hikes would be required until there is consistent evidence that inflation is trending towards the 2% target. Although this could take a considerable amount of time. It is worth noting that the current inflation rate in the US stands at 6.4%, which is significantly higher than the target rate. Additionally, the bond market appears to have completed its easing phase, indicating that further rate hikes may be necessary to curb inflation.
Elliott Wave Analysis
Today, the SPX500 breached a critical support level, indicating that the Minute Degree Zigzag pattern is potentially complete. This breach is highlighted by the downward movement of the price through the Red Minute Degree Channel Trend Line support. Although there is a possibility of a rebound and an upward correction, it is crucial to note that the likelihood of a downward move has now increased. Moreover, it is worth noting that the next support level is the upper Blue Intermediate Degree Channel Trend line. Additionally, if the index falls below the Dec 21 low of 3763.39, the downtrend should persist towards the lower channel support.
US10Y Benchmark Yield
The US 10-year yield experienced an intraday peak of 3.968% before closing at 3.919%. However, in after-hours trading, the yield has slightly increased to 3.927%. Unfortunately, there is a possibility that the yield may climb back up to the 4.0% level, which could have adverse effects on the US economy and interest rate-sensitive assets.
USD/PEN TECHNICALS
The US Dollar Peruvian Sol currency pair has broken through support level and is currently moving towards the Jan 12 intraday low of 3.76. If this support level fails to hold, the pair could continue to decline towards 3.52.
