As we move into a critical stretch of the trading calendar, markets are rallying not on earnings strength or economic resilience—but on the growing belief that the Federal Reserve will be forced to pivot. Political tension is escalating, macroeconomic signals are mixed, and expectations for a rate cut are firming. Traders are no longer waiting for confirmation; they’re front-running change.

Powell Under Pressure

The core of this unfolding narrative is Federal Reserve Chair Jerome Powell facing increasing scrutiny not only from markets but from political corridors. While Powell’s term officially extends through May 2026, reports suggest that former President Donald Trump is preparing to name a successor as early as September or October.

Though the Supreme Court reaffirmed the Fed’s legal independence, any early announcement would shift market attention from Powell’s cautious stance to the outlook of a potentially more dovish, politically aligned nominee. For traders, the policy shift could come well before the Chair’s replacement is confirmed.

Debt, Rates, and the Fiscal Balancing Act

Trump’s push for aggressive rate cuts is rooted in fiscal strategy. A 2–3 percentage point reduction in interest rates, he argues, could save the U.S. government up to $900 billion annually in debt servicing. With interest payments forecast to exceed $950 billion this year surpassing discretionary spending this narrative is gaining traction. The recent extension of Treasury cash operations to July 24 to avoid breaching the debt ceiling only adds urgency.

Despite political pressure, Powell is holding the line. In his latest testimony, he reiterated a “wait-and-see” stance. Yes, cuts are possible “sooner rather than later,” but only if inflation continues easing. Importantly, the Fed still anticipates tariff-related inflation pressures resurfacing in late 2025.

 Market Sentiment

Markets are already pricing in change. According to CME’s FedWatch Tool, there’s a 91.5% probability of a rate cut at the September 17 FOMC meeting, while a July move carries only a 19.1% chance. The divergence between the Fed’s rhetoric and market expectations is widening, driven largely by Trump’s anticipated influence.

The U.S. Dollar Index (DXY) has already shed over 8% year-to-date, a reflection of this growing uncertainty. A politically driven pivot at the Fed could further pressure the greenback, especially if incoming data begins to disappoint.

Equities, Liquidity, and Assumptions

Equity markets continue to climb, with the S&P 500 rallying not on earnings momentum but on hopes of imminent rate cuts. As the M2 money supply increases and borrowing costs appear likely to decline, investors are flocking toward rate-sensitive assets. But this is a rally built on anticipation, not fundamentals, a rally that’s highly vulnerable to any deviation from the expected monetary path

Key Technical Aspects to Watch This Week

Currencies

US Dollar Index (USDX): Testing key support at 96.50. If weakness persists, the next support zone lies near 95.40. Conversely, a consolidation rebound toward 97.70 may offer short-term bearish setups.

EUR/USD: Resistance at 1.1770 holds firm. Consolidation near 1.1605 may support a bullish continuation if ECB rhetoric stays behind the Fed in a dovish tone.

GBP/USD: Faces resistance at 1.3790; possible pullback targets include 1.3605. Upcoming BoE commentary could set direction.

USD/JPY: Key zones lie at 143.10 (support) and 145.75 (resistance). The yen remains sensitive to relative policy divergence as Japan exits ultra-loose policy.

USD/CHF: Weak bounce potential toward 0.8050 or 0.8110 likely faces bearish rejection under continued dollar pressure.

AUD/USD & NZD/USD: Watching 0.6490 (AUD) and 0.6005–0.5730 (NZD) for bullish setups; sentiment hinges on commodity flows and China’s outlook.

USD/CAD: Resistance near 1.3810 could be tested again; bearish setups depend on oil prices and Canadian jobs data.

Commodities & Indices

Crude Oil: Resistance stands at 71.80 and 73.40, with support at 63.35 and 61.00. Oil remains range-bound between seasonal optimism and global supply concerns.

Gold: Eyeing bearish reaction near 3,330; next downside targets include 3,220 and 3,175. Political uncertainty may drive volatility without directional clarity.

S&P 500: Eyes 6,200, 6,400, and 6,630. A pullback is possible if labor data surprises the upside and weakens dovish bets.

Nasdaq: Targeting 22,600 to 24,600, powered by AI and tech names, though market breadth remains thin.

Bitcoin: After breaking higher, BTC eyes 109,650 and 111,300. Still tethered to macro rate sentiment and USD weakness.

Ethereum: Resistance at $2,580 could trigger the next leg upward, subject to risk sentiment and regulatory clarity.

Natural Gas: Strong rally toward 3.65, with 3.75 and 4.046 as the next resistance zones.

Silver: Dropped from 36.70; watch 36.45 for bearish continuation setups.

Equity Watch

UNH (UnitedHealth): Trading well below its intrinsic value of $570; consolidation above $324.41 could trigger upside momentum.

Novo Nordisk (NVO): Trading around 67.80, still far from its estimated fair value of $150. Long-term investors may consider gradual accumulation.

Key Events to Track This Week

Tuesday, July 1: Central bank speeches from BoE’s Andrew Bailey and BoJ’s Kazuo Ueda, followed by Powell’s remarks. Market tone will hinge on policy recalibration hints.

JOLTS Job Openings: Forecast at 7.45M. A soft print could confirm a dovish outlook, while a beat may stall expectations.

Thursday, July 4: A data-packed day featuring U.S. Non-Farm Payrolls (expected 120K) and Unemployment Rate (forecast 4.3%). A sharp miss could elevate July’s FOMC into focus—but Powell has made it clear: one weak report isn’t enough.

Markets are moving ahead of the data, and expectations are being priced in before policy shifts occur. Whether this optimism holds will depend on how macro data unfolds in the coming weeks. Rate-sensitive assets, from equities to gold, are set for increased volatility, especially if Powell’s message strays from the market’s narrative.

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