Forex Analysis & Reviews: 20.03.2025 - Markets Are Stuck in a...

20.03.2025 09:23 AM

Markets Are Stuck in a Vicious Circle with No Exit in Sight (Potential Decline for Bitcoin and Gold Prices)

The markets are currently experiencing significant shock due to a prevailing negative sentiment that looms over them like a heavy burden, with no resolution in sight. Given this situation, the future dynamics of the market remain uncertain and raise important questions.

As expected, the Federal Reserve left all monetary policy parameters unchanged. During the press conference, Chairman Jerome Powell confirmed that the central bank hopes to cut the key interest rate twice this year but highlighted existing problems and risks. So, what are those?

The Fed chair didn't hide the consequences of Donald Trump's customs tariffs. He explicitly stated that the tariff policy is likely to lead to higher prices, and it is unclear how much prices will rise or whether these inflationary changes will be temporary. Powell admitted that the Fed itself doesn't fully understand the long-term effects of the 47th president of the United States' economic and geopolitical actions. The uncertainty factor will continue to loom over the national economy and markets.

Furthermore, for the first time since Donald Trump took office, Powell hinted that the tariff policy will contribute significantly to rising inflation as tariffs increase the cost of imports. This is especially notable because the structure of the U.S. economy remains primarily service-oriented. A majority of goods are imported, not produced domestically. This means that the rising costs of imports will likely drive inflation higher, potentially reaching levels much higher than what we see now.

So, why did the U.S. stock market receive even a small but much-needed boost in this gloomy situation?

First and foremost, this is because, despite the crisis in Europe, geopolitical tensions in the Middle East, and elsewhere, foreign capital is still flowing into the U.S., seeking refuge in such uncertain times. Additionally, after Powell's press conference, investors suddenly recalled that the Fed might cut interest rates twice. However, the markets and Powell seem overly optimistic and out of touch with reality. The reality is that with the expected rise in tariff-induced inflation, the risks of a recession, coupled with stagflation, are looming, making it impossible to lower interest rates under the current central bank monetary model.

Considering everything described above, I don't see any prospects for a strong recovery in demand for U.S. stocks, tokens, or commodity assets due to the extremely high uncertainty about the future of the U.S. and the global economy. The market is stuck in a vicious cycle, moving along without any current possibility of breaking free. The only asset that will likely continue to be in demand is gold, a safe-haven asset currently testing the $3,050 per ounce level. Also, under the current conditions, the U.S. dollar, according to its ICE index, will likely continue to consolidate in the range of 103.20-104.00 points for some time.

Forecast of the Day:

Bitcoin

The token is trading erratically, influenced by limited demand due to the overall uncertainty that dominates the markets. This prevents it from growing confidently. Its inability to break above the resistance level of $86,500 could lead to a local reversal and a decline to the $82,200 mark.

Gold

Gold prices are receiving support due to high geopolitical risks and uncertainty surrounding the U.S. and global economies. Investors and central banks are actively buying gold to hedge their financial risks. The local overbought condition of the asset may lead to a correction to $3,025, from which it will try to rebound. After overcoming the $3,050 mark, it may aim for the new target level of $3,080.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.