The Federal Reserve will hold its September interest rate meeting this week. The market generally expects that the Federal Reserve will cut interest rates for the first time since March 2020 this week, thus opening the curtain of the interest rate cut cycle. The focus of the debate now is how big the first interest rate cut will be? Will it be 25 basis points or 50 basis points?
Through the trend of CME federal interest rate futures, we can observe the market's bets on the probability of the Fed's interest rate cut. Over the past weekend, the probability of betting on a 50 basis point rate cut climbed to 50%, and now it has further climbed to 63%, which has exceeded the probability of betting on a 25 basis point rate cut. A week ago, the probability of betting on a 50 basis point rate cut was only 30%.
There are still differences in market opinions. Among the large US banks, including Bank of America and Goldman Sachs, they are still in the camp of cutting interest rates by 25 basis points, while JPMorgan Chase expects a 50 basis point cut. Analysts who support a 25 basis point cut believe that the current inflation rate is still higher than the Fed's 2% target, and the core inflation rate is higher than expected on a month-on-month basis, which means that the Fed should act cautiously.
However, the analysis supporting a 50 basis point rate cut mainly focuses on concerns about the labor market. Recent U.S. employment data showed signs of weakness, and many investors and some economists are worried that the Fed has waited too long, putting the U.S. labor market and economic growth at risk and triggering volatility in financial markets. In order to avoid a recession, market participants called on the Fed to act faster.
Regarding interest rate cuts, there are several main views in the market:
1. Interest rate cuts are good news. The September rate cut will be the starting point of a new trend.
2. Interest rate cuts are bearish in the early stages, and bull markets will only emerge after a black swan appears.
3. The second half of the previous rate hike was bullish, so the first half of the rate cut will be bearish
Why does the market often have a good opportunity to bottom out after the first interest rate cut?
Looking back at the first rate cut in 2019, similar to the current situation, both were preventive rate cuts. At that time, the U.S. stock market showed a clear tug-of-war trend before and after the rate cut, testing the 200-day exponential moving average as many as five times.
Before the rate cut on the 18th, the market had already stepped back to the moving average three times, which indicates that after the rate cut, the market may continue to be in a state of uncertainty and entanglement.
The reason for comparing these two periods is that the market concerns and sentiment were very similar during these two periods:
Bulls believe tightening is over and the market is entering a more accommodative phase
Bears are concerned about tail risks, such as whether inflation will return or the economy will enter a recession.
It is foreseeable that in the next month, the market may continue to test the bottom. For the cryptocurrency market, this may mean that a period of repeated shocks and bottoming out is coming.
Market Analysis
The daily line is a positive line with upper and lower shadows, and the trading volume is larger than the negative lines of the previous three days.
The daily MA30 line is still flat, and MACD shows an increasing upward momentum near the zero axis. The price has returned to above the daily MA30 line.
It can be seen that since the daily MACD has not crossed the zero axis, the trend in recent days has been moving up and down around the MA30 line. The Federal Reserve will announce the interest rate decision tomorrow morning, and the contract is recommended to watch less movement.
Today's daytime market will be mainly volatile, and the U.S. stock market may rise first and then fall when it opens in the evening.
Daily level pressure level is 62550, support level is 58255
From the hourly level, the current trend is a 10-15 minute rebound, showing a pattern of insufficient upward momentum. Next, you can go long at 59620 and 59160, and go short at 62550. Pay attention to stop-profit and stop-loss.
From the three-day liquidation heat map
The price is going up, and there are a lot of large short orders waiting to be liquidated in the 61200-62450 area.
The price is going down. There are a lot of large long orders waiting to be liquidated in the 59550-58500 area, the 58350-57700 area, and the 57550-56000 area.
