Fed's Hammack: Rate Hike May Be Needed if Inflation Persists

The possibility of a rate hike from the Federal Reserve is likely to have a negative impact on markets. GOOGL shares have already lost more than 6% in the last 24 hours. The RSI14 indicator is at 21, indicating oversold territory. However, in the short term, rate hike concerns could further drag down stock prices. Therefore, a downward movement is expected in the near term.

A rate hike signal from a Fed official could create selling pressure in the markets. On the SPX, the RSI is approaching overbought territory at 62, while the MACD has started to fall below the signal line. In the short term, the likelihood of a pullback below the 7600 level is increasing. However, the 20-day SMA (7594) and 50-day SMA (7546) may act as support. The impact of the news may be limited, as there has been no official policy change yet.

A Fed official's signal of a potential rate hike could weaken market expectations for rate cuts and negatively impact risk appetite in the short term. The RSI on the NDX at 68 indicates the index is approaching overbought territory and is vulnerable to a potential correction. The MACD recently crossing below its signal line suggests weakening momentum. This technical weakness, combined with the negative sentiment from the news, increases the likelihood of a short-term pullback for the index. However, the index remaining above its 20- and 50-day moving averages suggests any decline may be limited.

Hammack's hawkish statement may trigger a short-term upward move in the DXY. Technical indicators also support this view: the RSI is in bullish territory at 63.6, the MACD is above the signal line, and price is trading above the SMA20 and SMA50. However, the rate hike expectation may not be fully priced in, and the market may seek further clarity. Therefore, while an upward trend is possible, an exaggerated move should not be expected.