Chart of The Day

A big day has come for the US equities, and global financial markets in general. FOMC is set to announce another rate hike this evening at 7:00 pm BST. There is a scope for a surprise as economists and major banks are divided on whether the hike will be by 50 basis points or by 75 basis points. Expectations tilted towards a 75 bp option in recent days but scope for a surprise remains. Fed will also release a new set of forecasts as well as a famous dot-plot chart. Only 1 Fed member expected Fed funds rate to exceed 3% by the end of year back during a meeting in March. However, if banks deliver a 75 bp rate hike, Fed funds rate will jump to 1.50-1.75% and more rate hikes are expected afterwards. This means that the median dot-plot forecast is likely to jump. By how much? This is the question.

A hawkish decision may exert pressure on already battered equity markets. Tech stocks are the most exposed and Nasdaq-100 (US100) has been trading lower for over half a year now, losing more than 30% over the period. Index has broken below support zone ranging below 50% retracement of post-pandemic recovery move (11,600-11,750 pts area) and is trading at the lowest level since early-November 2020. A 75 bp rate hike combined with a jump of median dot-plot forecast towards 4% may be a strong bearish trigger for the index with 10,650 pts zone marked with 61.8% retracement being the next major support to watch.

Source: xStation5

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