Top three trading insights on Discord – American session Premium recap

Do you know FXStreet has its exclusive trader's community on Discord? There, Premium users can contact Analysts Yohay Elam and Tomas Salles directly and ask them any questions related to the markets and trading. Here we offer you a selection of the best three questions and answers during this American session.

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1  – USER QUESTION – I was wondering how a very hawkish Fed statement will affect the stock market?

ANALYST ANSWER – Yohay Elam: 

An extremely hawkish Fed would look like a rate hike worth 100 bps and perhaps also an announcement about accelerating the bond sales program – the opposite of printing money. It would also include a promise to do whatever it takes, even a recession, just to bring inflation down.
In that case, markets would crash initially, but perhaps they could recover later, thinking that the Fed has things under control and better swallow hard medicine now to stabilize inflation and to have lower yields later. I have more confidence that an extremely hawkish scenario would push 10-year yields lower and boost gold. I'm less sure about stocks. 
In any case, we're talking about extreme hawkishness. The Fed has two mandates, price stability and full employment. I don't see them fully abandoning the full employment mandate.

USER FOLLOW-UP – Three Arrows keeps adding collateral right now to avoid liquidation, only minutes before it almost happened...crazy... 

ANALYST ANSWER – Yohay Elam: 

Yeah, they are in a tight spot and promised to work out the situation. Let's see if they succeed. Some crypto companies will collapse, but those that survive will come out stronger and have less competition.

2 – USER QUESTION – Do you expect BTC/USD to reach 21,400 before going back down? I want to know when to set a short hedge position.

ANALYST ANSWER – Yohay Elam: 

I also see some resistance at 21,467, and then 22,300 and 24,240.. But before that, there is resistance at around 20,800, which provided support twice and is now capped the pair. The round 20,000 level is critical psychological support. I think BTC/USD has more room to fall, but 20,000 is a tough spot to crack. The first attempt resulted in a nice bounce. I think the second one could be decisive, but even Bitcoin is waiting for the Fed.

USER FOLLOW-UP – So you mean if the Fed increases interest rates to 100 bps or 75 bps, Bitcoin will continue falling. And if Fed's decision is a 50 bps rate hike, then BTC will go up. Am I right?

ANALYST ANSWER – Yohay Elam: 

The interest rate decision for today is only one factor, but if the Fed hikes by only 50 bps today, it is undoubtedly dovish and should help Bitcoin recover. 
If they hike by 75 bps, the next moves depend on: 
1 – What do they say about July, another 75 bps? 
2 – What do they say about September, open-ended? 
3 – Powell's general tone – fighting inflation at all costs is extremely hawkish while balancing the need to keep full employment is dovish.

3 – USER QUESTION – Any advice for the EUR/JPY?

ANALYST ANSWER – Yohay Elam: 

EUR/JPY is a roller coaster, but at least it's well-behaved – it stopped at the 4h-50 SMA, coming out at around 141.50. I think is has some room to the downside after that rejection, perhaps to the daily low of 140.60. Further support is at 140. Resistance beyond 141.50 is at 142.10 and then the next meaningful cap is only at 144.20.  The RSI, MACD and SMAs are mostly balanced.
If the Fed is hawkish, it would put additional pressure on the BOJ to abandon its policy and in general, would weigh on the market mood and push the pair lower. If the Fed is relatively dovish, the pair could edge higher. I lean toward a hawkish 75 bps hike but we will know soon enough.