Sat, Mar 25, 2023 @ 04:40 GMT

Fed Goes “All In”

The US Fed has provided unprecedented stimulus to the US markets so far, include slashing interest rates to 0%-25%,  QE4, extending credit lines, and participating in the overnight commercial paper markets.  Today, the Fed has announced TALF, or Term Asset-Backed Securities Loan Facility.  TALF allows the Fed to buy UNLIMITED amounts of Treasuries and Mortgage securities.  In addition,  the Fed established PMCCF,  or Primary Market Corporate Credit Facility , and SMCCF, or Secondary Market Corporate Credit Facility.  These programs allow the Fed to buy corporate and investment grade bonds in the secondary markets and some ETFs.  These special purpose vehicles will allow the Fed to continue to ease corporate credit conditions.  The vote was unanimous at the emergency meeting.

By the way, don’t forget that congress in trying to put together a fiscal package worth $2 trillion to help individuals, including providing cash directly to eligible individuals.  There have been several votes so far, however none have passed both houses of congress.  There may be another vote later today.

Stocks shot higher after the TALF announcement, as markets are taking this effort by the Fed as the ultimate backstop for the economy.  S&P 500 futures shot up from 2214 to 2386, 172 HANDLES! If price breaks these highs, there is horizontal resistance near 2420 and then Friday’s highs near 2500. Overnight support at 2239.50 and the overnight lows near 2174.

Source: Tradingview, CME, FOREX.Com.

Watch the DXY!  The Fed is flooding system with US dollars.  Theoretically, more supply of US Dollars should push the price of the DXY lower.  Since the announcement, the DXY  has moved from 102. 71 to 101.70.  If the DXY does move higher, this will signal that the demand for US Dollars is overwhelming the supply and the aggressive Fed measures may not be enough.  There really isn’t any resistance until Friday’s highs near 103.  First support is at today’s lows near 101.70.  Support below that at Fridays lows of 101.09.

Source: Tradingview, FOREX.Com.

As governments continue to provide more and more stimulus to global economies it will be important to watch the reaction in the markets.  The main question will be:  Is it enough?
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Featured Analysis

Learn Forex Trading