FED MEETING: WHAT TO KNOW AHEAD OF DECISION

This week, the most important agenda of the USA is the interest rate decision that the Fed will announce on Wednesday. It is of great importance whether the Fed will change this expectation in its first meeting in 2021, especially if it promises not to increase interest rates until 2023. The general expectation in the markets is that the Fed will not make any policy changes, but the increase in inflation signals may cause the Fed to give clues about what policy it can pursue against inflation risk.

US Federal Reserve (Fed) Chairman Jerome Powell stated at the video conference event held by Princeton University Bendheim Financial Center on January 15 that they would not raise interest rates unless they saw a problem with inflation. Powell also highlighted that when the time comes to raise interest rates, they will definitely do so, but that time is not near. The Fed stated at the previous FOMC meeting on December 16 that it would be appropriate to maintain the current 0-0.25 percent target range for the federal funds rate until inflation hits 2 percent and moderately exceeds 2 percent for a while. In addition, in the last meeting, it was stated that the pace of recovery in the economy has slowed in recent months, and financial support was emphasized with the ongoing epidemic risk.

It can be expected that the new President of the USA, Joe Biden, will renew his emphasis on the stimulus package by giving verbal guidance regarding the Fed's meeting to be held tomorrow. It is also among the strong expectations that the emphasis on weakening employment and inflation will continue. If the Fed reiterates its fiscal support emphasis by remaining on hold on interest, the weak picture on dollar assets can be expected to increase.

 

EURUSD

If the Fed takes a dovish stance and only uses its verbal statements, the continuation of the dollar negative scenario may limit the downward trend in the pair. Especially on the European side, increasing epidemic concerns caused the parity to lose some value, while it is seen that the pair continued to move above 1.2130 before the FOMC meeting. Especially if the Fed behaves in line with the expectations, it can be expected that the parity will increase its attacks towards 1.2175 level again. In close above this level, we will follow 1.2220 and 1.2270 resistance levels. However, depending on a possible realization, if the first attack point of 1.2090 support is below this level, the decreases can be expected to continue up to 1.20 support.

 

XAUUSD

The weak dollar scenario may continue if the Fed continues its verbal guidance without changing the interest rates in line with the expectations. Especially with the emphasis on financial support, we can see that the recovery in precious metal gains momentum. In this context, the course of the prices above the 1850 level is important. With the maintenance of this level, we follow the resistance levels of 1870 and 1890 in the rise that may occur in the precious metal. However, we will have 1825 and 1800 critical support crossing points in case of retreats due to possible sub-1850 mobility.

 

NASDAQ

The Nasdaq index, which had a strong stance among the US indices that started the week with a mixed course, retreated to the level of 13,400, but returned from this level again. In the index, which intensifies its attacks towards the 13.460 level, increases may target the resistance levels of 13.570 and 13.700, depending on the occurrence of closing above this level. However, if the Fed emphasizes that the uncertainty regarding the economic outlook increases, we follow a downward realization in the index within the framework of 13.300 support. This below level close may lead dips to test the support levels 13,140 and 13,000.