HAWKISH FED: "No Short Term Cuts" – Fed Ignores CPI and Prepares Trap for Bulls

[Igor Pereira]

Traders, the market was bursting champagne with the 2.4 percent CPI, but Federal Reserve just arrived to end the party.

In a direct statement that contradicts recent euphoria, Fed officials declared that "inflation needs to fall more" and that "interest rates will probably not change in the short term".

By Igor Pereira Financial Market Analyst

That's a bucket of cold water in the March Pivot account. Below is the analysis of why they're doing this and how it affects the Gold setup we drew yesterday.

Why would the Fed maintain a hard posture (Hawkish) if inflation has already fallen to 2.4%?

• The Fear of Repique: The Fed knows that if they loosen the financial conditions (rolling up, dollar falling) very fast, inflation will rise again (as in the 1970s).

• The Strategy: They're using the rhetoric to keep market interest (Yields) high, without needing to increase the official rate. They want to make sure inflation is dead and buried before it cuts.

• The Reality: It creates a volatility shock. The market priced cuts; the Fed said no. Whoever bet everything on Pivot immediately is going to get blown up.

The dollar was bleeding, but that line gives American currency a survival.

• Reaction: Wait for a pop-back on DXY. The short-term traders will cover your shorts.

• The Danger: This does not change the long-term trend (DXY technical collapse), but in the short term, it can push the index back to test previous resistances.

Yesterday we warned about the loss of triangle support and the possibility of seeking lower liquidity. That Fed line is the fundamental catalyst for that move.

• Validated scenario B: If the interest will not fall now, the Gold loses its immediate speculative momentum. This dramatically increases the likelihood of us seeing the test in support zones that we mentioned in the technical analysis in the Premium previous.

• Opportunity: Remember, falls caused by Fed's lines are purchase opportunities. The Fed You will. that eventually cut (due to debt), no matter what they say today. They're just buying time.

The Fed is bluffing with a weak hand, but the market will respect the bluff for now.

My Vision: Prepare for turbulence.

1. Don't Buy Breakups: Don't try to buy Gold on the force now. Fed put a temporary roof on the price.

2. Wait for Level: Let the market bleed to institutional support levels ($4,500 or $4,170). ignoring the Fed's noise.

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