From a fundamental standpoint, as expected, the Fed raised interest rates by 25 bps yesterday and suggested one more increase by year-end, in line with analysts’ estimates. Warsh maintained that the US economy, booming with inflation above target, requires more restrictive policy. Initially, a bull flattening was expected; however, after Warsh’s conference, the move turned into one with significant upward pressure on short-end yields and hike expectations while keeping the long-end bond yield lower. Or, in simple terms, a bear flattener. Within equities, defensive or value-oriented sectors (such as Consumer Staples and Healthcare) typically outperform growth and tech stocks during bear flatteners as growth equities get squeezed by higher discount rates. On the equities front, the Small Cap Index is expected to be the most affected, while the SPX Index is expected to weather the storm better.
From a technical standpoint, SPX is retesting the breakdown of the $7,615-$7,625 level. Note that this is the previous breakout level that we have been reiterating this week. This level was broken two days ago and reached our $7,530 target yesterday. Looking into the day, as the index is giving a breakdown retest of this level, there is an attractive short opportunity with targets reaching $7,575. On the flip side, if the $7,615-$7,625 level is recovered, the bulls regain control, with targets reaching $7,680.
U.S. Dollar Index
The dollar index held around 100.3 today, following a sharp gain in the previous session and remaining near seven-week highs after the Federal Reserve raised interest rates for the first time in three years. The FOMC unanimously increased the federal funds target range by 25 basis points to 3.75%-4%, as expected, while signaling that further tightening could still be required to contain persistent inflation. Fed Chair Kevin Warsh also stressed that inflation remains too high, reinforcing the dollar’s yield advantage.
The Fed’s outlook has kept Treasury yields elevated, although the 10-year yield eased three basis points to 4.99% after an eight-day rise. The retreat in longer-dated yields has provided some relief to bond markets, but the front end remains sensitive to expectations for further Fed tightening. Recent data showed core inflation rising more than expected in August, which supports the case for tighter conditions and maintaining demand for the dollar.
The dollar is also benefiting from weakness in the euro, with EUR/USD falling below 1.15 as political and fiscal concerns in France add pressure to the single currency. Meanwhile, the yen’s decline following the Fed’s hawkish message has provided an additional, though secondary, source of dollar support. With markets reassessing the pace of global monetary-policy divergence, the Fed’s inflation outlook and expectations for additional hikes are likely to remain the key drivers for the dollar in the near term.
Technically, the DXY is showing a slight pullback after reclaiming and sustaining above the psychologically important 100 mark for the first time in roughly a month. Following the recent strong upside move, a retracement toward the 8-period EMA on the 4-hour chart, currently near 100.025, remains a possibility before any further continuation higher. If buyers maintain control, the next upside target comes in around 100.256. Meanwhile, EUR/USD continues to trade within a bearish flag formation, keeping near-term risks tilted to the downside. Any corrective bounce could face resistance around 1.1502, a previous support level that has now turned into resistance. On the downside, the pair could initially target 1.1456 near the day’s lows, with a deeper move potentially extending toward 1.1447, which remains a key structural support level.
Crude Oil
Both WTI and Brent dropped in today’s session, by 1.37% and 1.85% respectively, as fears of disruptions ease.
Saudi Arabia is seeking to restore about half the capacity of its cross-country oil pipeline within days, after the link was halted last week following drone attacks. Following the shutdown, Aramco has been ramping up oil sales from outside the Strait of Hormuz to partly make up for the lost volumes, Bloomberg reported earlier. It has sold about 20 million barrels to Asian refiners this week, including in China, that can be lifted in September and October. Libya, too, has restarted its oil output, which means additional supply will hit the market. Lastly, Trump is set to meet GCC leaders, which is seen as a positive sign for de-escalating the war and is therefore bearish for crude.
Technically, on the four-hour chart, we see a descending channel forming, connecting the high of 15th September and the low of 16th September at $101. WTI has tried to break above the descending channel but has failed. Resistance lies at $102; on a break above $102, the next resistance lies at $103, based on the Fibonacci retracement (at 0.786) from the high of 6th March to the low of 2nd July. On the downside, support lies at $98.
Immediate support for Brent on the four-hour chart is at $103. On the upside, the key level is at $107; a break above this could push prices to $111.
Gold & Silver
Gold trades near $4,327, holding a modest post-FOMC bounce after the Fed delivered its widely expected 25bp hike this week. With such heavy tightening already priced in, the incentive for markets to factor in further hikes remains limited, but the hawkish confirmation still reinforces the higher-real-yield, firmer-dollar backdrop weighing on bullion. The metal is consolidating in a tightening wedge on the intraday chart, with today’s bounce looking more like a relief rally within a broader downtrend than a genuine reversal, given price remains well below its August highs near $4,692.
On the technical side, gold is capped within a descending channel from the late-August high, with intraday resistance at $4,340, followed by $4,370 and then the broader channel top near $4,450. Support lies at $4,300, then $4,275, with a break below exposing $4,240–4,200. A sell-on-rise approach toward resistance is favoured while the channel structure holds, and the bias stays range-bound to bearish below $4,370; only a decisive close above this level would challenge the broader downtrend.
Silver trades near $64.00, tracking gold’s modest bounce but remaining capped within its own descending channel since the early-September high. The same post-hike dollar strength weighing on gold applies here too, keeping the metal’s rallies contained so far.
Technically, silver holds intraday resistance at $64.50, followed by $65.49 and the broader trendline near $66.00–67.00. Support sits at $63.00, then $62.66, with a break below opening the way toward $61.50–61.00. A sell-on-rise approach toward resistance is favoured while the downtrend holds, and the bias stays range-bound to bearish below $65.49; only a close above $66.00–67.00 would shift the outlook.
