On Wednesday, the stock market experienced a slight downturn, with the S&P 500 and Nasdaq Composite falling due to a pullback in tech shares, including notable declines in Nvidia, Meta Platforms, and Apple. This shift came after a record-setting session, spurred by U.S. inflation data that met expectations, causing investors to remain cautious about future Federal Reserve actions. Amid this backdrop, the dollar index saw a modest decline, and attention is now turned to upcoming economic data releases and central bank meetings, which will further guide market sentiment and monetary policy outlooks.

Stock Market Updates

The stock market experienced a slight retreat on Wednesday, following a record-breaking session the previous day, with the S&P 500 index falling by 0.19% to close at 5,165.31. The tech-heavy Nasdaq Composite also saw a decline, dropping 0.54% to end the day at 16,177.77. Conversely, the Dow Jones Industrial Average managed a modest gain, adding 37.83 points to close at 39,043.32. This shift in market dynamics was partly due to a cooldown in Nvidia’s shares, which fell by 1.1%, contributing to broader losses in the tech sector, including declines in Meta Platforms and Apple shares.

The decline in tech stocks, including a 2% slide in the VanEck Semiconductor ETF, reflects a broader trend of profit-taking following significant gains in the sector, particularly after Tuesday’s rally. According to Adam Crisafulli, founder and president of Vital Knowledge, despite the day’s pullback, the sentiment towards AI and data centers remains overwhelmingly positive, fueled by anticipation for Nvidia’s upcoming GTC conference. This optimism comes in the wake of a winning session on Wall Street, buoyed by U.S. inflation data for February aligning with expectations, which had previously ignited a more than 1% jump in both the S&P 500 and Nasdaq.

The recent U.S. inflation report indicated a rise in core inflation, stripping out food and energy costs, which was higher than anticipated last month. This has led to a cautious approach among investors, as explained by Ayako Yoshioka, senior portfolio manager at Wealth Enhancement Group. With the Federal Reserve’s monetary policy and the upcoming meeting on March 19 in sharp focus, investors are keenly observing for signs of how the central bank will address these inflation trends, with Fed Chair Jerome Powell expected to maintain a data-dependent and neutral stance.

Concerns over inflation are further compounded by the increasing costs in the services sector, suggesting that the economic landscape might be more complex than initially perceived. This nuanced view of the economy is crucial as investors and analysts alike parse through the latest CPI data, seeking indications of future monetary policy directions. Moreover, the market is also reacting to corporate news, such as Dollar Tree’s 14% drop following its fourth-quarter results, with more inflation data expected to be released soon, providing further insights into the economic climate. 

Currency Market Updates

On the currency front, the dollar index saw a slight decline of 0.22%, erasing recent gains spurred by job and CPI reports that had previously lifted Treasury yields. This comes ahead of crucial data releases set for Thursday, which are expected to influence the Federal Reserve’s projections for interest rate adjustments in the coming year. Meanwhile, the EUR/USD pair gained, and the market is closely monitoring the European Central Bank’s rate decisions, amid a global financial landscape attentively awaiting the next moves by major central banks, including the Federal Reserve and the Bank of Japan, in response to inflationary pressures and economic data.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD gains ground amid weaker dollar and anticipation of central banks’ easing measures

On Wednesday, the EUR/USD pair saw an uplift, reaching three-day highs in the 1.0960/65 range as the US Dollar weakened, driven by a growing appetite for risk and a drop in the USD Index below the 103.00 mark. This movement coincided with a rise in both US and German bond yields, reflecting broader financial market trends. Despite expectations for the Federal Reserve and the European Central Bank to begin easing monetary policy by early summer, likely in June, the pace of interest rate cuts could differ between the two, adding an element of uncertainty. However, the prospect of simultaneous easing measures by both banks, against the backdrop of a stronger US economy compared to the euro area’s slower fundamentals, suggests a potential medium-term strengthening of the Dollar. This scenario hints at a possible correction for the EUR/USD, initially towards its year-to-date low of around 1.0700, with further downside potential in the longer term.

Chart EUR/USD by TradingView

On Wednesday, the EUR/USD moved higher and reached the upper band of the Bollinger Bands. Currently, the price is moving just below the upper band, suggesting a potential higher movement, and may reach the resistance level. Notably, the Relative Strength Index (RSI) maintains its position at 62, signaling a bullish outlook for this currency pair.

Resistance: 1.0984, 1.1079

Support: 1.0907, 1.0812

 Economic Data

CURRENCIES:

Market Sentiment Analysis & Outlook Summary (Mar 13, 2024):

Gold Forecast:

• Retail traders show a net-short bias in gold, with more bearish than bullish positions.
• Bullish bets have decreased by 9.67% from yesterday and 12.80% from last week.
• Bearish positions slightly down by 0.31% from yesterday but up 13.15% from last week.
• Contrarian analysis suggests gold prices may rise in the near term.

Silver Forecast:

• A significant majority of traders (81.60%) are net-long on silver, indicating a bullish sentiment.
• Net-long traders have decreased by 7.08% from yesterday and 12.23% from last week.
• Net-short traders increased by 6.86% from yesterday and 21.81% from last week.
• Contrarian view hints at a potential downward price movement due to overwhelming bullish sentiment.

US Crude Oil Forecast:

• 69.87% of retail investors are net-long on US crude oil, with a bullish to bearish ratio of 2.32 to 1.
• Net-long positions have decreased by 8.58% from yesterday and 17.45% from last week.
• Net-short positions rose by 17.58% from yesterday but slightly down by 0.48% from last week.
• Contrarian perspective suggests a possible decline in oil prices soon.

S&P 500 Forecast:

• 33.09% of traders are net-short, indicating a bearish to bullish ratio of 2.02 to 1.
• Net-short positions have increased by 4.42% since yesterday but are marginally down by 0.03% from last week.
• Net-long positions are up by 2.89% from yesterday and 4.76% from last week.
• The current net-short sentiment among traders implies potential for continued upward movement in the S&P 500.

EUR/USD Forecast:

• 43.27% of traders are net-short on EUR/USD, with a bullish to bearish ratio of 1.31 to 1.
• Bullish positions decreased by 0.73% from the previous session and 19.44% from last week.
• Net-short positions are 2.10% lower than yesterday but slightly higher by 0.28% from last week.
• The prevailing net-short positioning suggests EUR/USD may face little resistance on the upside.

STOCK MARKET:

S&P 500 Achieves New Record:

Financial Indicators:

Treasury Yields:

• The 10-year yield rose by 5 basis points, reaching around 4.15%.

Gold Prices:

• Dropped more than 1%, trading near $2,162.

Economic Data Insights:

Inflation Data:

• February’s Consumer Price Index (CPI) showed a 0.4% monthly increase, aligning with expectations.
• Core CPI, excluding food and energy, rose by 0.4% monthly and 3.1% annually, surpassing estimates.

Federal Reserve and Market Sentiment:

• The CPI data is critical for the Fed’s rate decision-making, with a focus on inflation trends before considering rate cuts.
• Market participants had anticipated stock movements of 0.9% in either direction before the CPI announcement.

Cryptocurrency and Corporate News:

Bitcoin’s Rally:

• Bitcoin surged above $72,000, continuing its impressive growth with a nearly 70% increase this year.
• Predictions suggest bitcoin could reach up to $350,000 within the year.

Oracle’s Progress:

• Shares soared about 12%, buoyed by advancements in cloud computing and a partnership with Nvidia
• Closed up approximately 1.2%, setting a new record high.

Nasdaq Composite Gains:

• Increased by about 1.5%, recovering from two days of losses.
• Nvidia’s 7% gain significantly contributed to the Nasdaq’s performance.

Dow Jones Industrial Average Rises:

• Grew by roughly 0.6%.

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Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

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On Tuesday, financial markets experienced significant gains following the release of U.S. inflation data that aligned with expectations, fueling a surge in tech stocks like Nvidia, Meta Platforms, and Oracle. The Dow Jones, S&P 500, and Nasdaq all posted notable increases, with the S&P 500 hitting a new record high. Meanwhile, the consumer price index’s rise mirrored forecasts, sustaining investor hopes for a Federal Reserve rate cut in June. In the currency sector, the dollar strengthened against major currencies, reacting to the inflation report and Treasury yield movements, setting the stage for the upcoming Fed meeting and economic indicators release.

Stock Market Updates

On Tuesday, the stock market witnessed notable gains, driven by U.S. inflation data that aligned with expectations, fueling investor enthusiasm towards tech giants such as Nvidia and Meta Platforms. The Dow Jones Industrial Average rose by 235.83 points (0.61%) to 39,005.49, the S&P 500 increased by 1.12% to a record close of 5,175.27, and the Nasdaq Composite advanced by 1.54% to 16,265.64. Notable movers included Nvidia, which jumped over 7%, Microsoft and Meta with increases of 2.6% and 3.3% respectively, and Oracle, which surged more than 11% following earnings that surpassed Wall Street’s forecasts.

The inflation update, with the consumer price index (CPI) rising by 0.4% for February and 3.2% year-over-year, was closely watched by the market. These figures met economists’ expectations and signaled a stabilizing inflation environment, albeit with core inflation rising slightly above forecasts at 0.4%. This data prompted analysts to maintain their outlook for a potential Federal Reserve rate cut in June, despite acknowledging the unpredictable path to the Fed’s 2% inflation target. 

Currency Market Updates

In the currency markets, the dollar index experienced a slight uplift of 0.2%, responding to the inflation data that pushed Treasury yields higher and adjusted the market’s expectations for Federal Reserve rate cuts in 2024. The yield on two-year Treasuries increased, and the overall sentiment shifted slightly, reducing the anticipated Fed rate cuts for the year, though a cut in June is still highly probable. The EUR/USD pair showed resilience, bouncing back after an initial drop, as market participants digested the implications of the CPI data and its impact on U.S. and European interest rate differentials.

Investors are now redirecting their focus towards other significant economic indicators and events, including the upcoming U.S. retail sales, Producer Price Index (PPI), and jobless claims reports. These data points, alongside the next Federal Reserve meeting scheduled for March 19-20, are expected to provide further clarity on the economic landscape and the central bank’s monetary policy direction. Additionally, the currency market remains attuned to developments around the globe, including the Bank of Japan’s potential rate decisions and the economic recovery signals from the U.S. and Europe.

As the financial world looks ahead, the anticipation builds for the Federal Reserve’s next moves, especially in light of recent economic data and global financial trends. The market’s reaction to the inflation reports, combined with upcoming economic indicators, underscores the delicate balance the Fed seeks to maintain between fostering economic growth and controlling inflation. With discussions and speculations around interest rate paths and policy adjustments, investors and analysts alike remain vigilant, ready to adapt to the evolving economic narrative.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD extends decline amidst US dollar resurgence and inflation concerns

The US Dollar’s (USD) continuous recovery has applied additional pressure on EUR/USD, resulting in the pair’s decline for the third consecutive session towards the 1.0900 support level. This movement coincides with the USD Index (DXY) experiencing an uptick to the 103.20 area, driven by higher-than-anticipated US Consumer Price Index (CPI) inflation figures. The resurgence in the Dollar is echoed by gains in US yields across various maturities, paralleled by the German 10-year bund yields nearing 2.35%.

With both the Federal Reserve (Fed) and the European Central Bank (ECB) anticipated to start their easing cycles in early summer, likely in June, the focus shifts to the pace at which interest rate cuts will unfold. Although the ECB may not significantly trail the Fed in this regard, the central banks’ strategies could highlight differences in their approaches to monetary policy easing.

Market sentiment, as gauged by the FedWatch Tool from CME Group, now shows an increased probability of about 60% for a rate cut in June. This adjustment in expectations comes amidst a backdrop where the solid resilience of the US economy starkly contrasts with the euro area’s more subdued fundamentals. This dynamic fosters a medium-term outlook favoring a stronger Dollar, especially with both central banks on the verge of commencing their easing programs nearly in tandem. Under such conditions, EUR/USD may face a deeper correction, initially aiming for its year-to-date low around 1.0700, with a potential extension towards the late October 2023/early November lows in the 1.0500 vicinity.

Chart EUR/USD by TradingView

On Tuesday, the EUR/USD moved lower and reached the lower band of the Bollinger Bands. Currently, the price is moving just below the middle band, suggesting a potential higher movement, and may reach the upper band. Notably, the Relative Strength Index (RSI) maintains its position at 54, signaling a neutral outlook for this currency pair.

Resistance: 1.0984, 1.1079

Support: 1.0907, 1.0812

 Economic Data

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Sydney, Australia, March 12, 2024 – VT Markets proudly proclaims the successful conclusion of its esteemed trading festival, the King of the Hill Trading Contest, which ran from November 2023 to January 2024. Building upon the momentum of the previous edition, this latest illustrious contest not only captivated the global trading fraternity but also set new standards of excellence and international camaraderie.

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Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact [email protected].

CURRENCIES:

US Inflation Preview: Impact on Gold, USD, and Stocks

Event Highlight: The U.S. Bureau of Labor Statistics to release February’s CPI data on March 12, 2024, crucial for investors and the Federal Reserve’s monetary policy.

Headline CPI Forecast: Expected increase of 0.4% for February, driven by higher energy costs, maintaining the annual rate at 3.1%.

Core CPI Forecast: Anticipated to rise by 0.3% month-over-month, with the year-over-year rate potentially decreasing to 3.7% from 3.9%.

Market Volatility: Deviations from market expectations could cause significant asset price movements.

Upside Surprise: Higher-than-expected CPI may indicate persistent inflation, potentially leading to upward adjustments in the Fed’s PCE forecast and fewer rate cuts. This could result in higher bond yields and USD, pressuring gold prices and stocks.

Downside Surprise: Lower-than-forecast CPI might confirm disinflation progress, supporting expectations for multiple rate cuts in 2024. This scenario could decrease yields and the USD, benefiting gold prices and risk assets.

STOCK MARKET:

Market Summary:

Key Data Point: February’s CPI report, crucial for the Federal Reserve’s next interest rate decision, will be closely watched by investors on Tuesday.

Headline Inflation Expectation: Forecasted to be 3.1%, aligning with January’s annual price increase, signaling potential interest rate cuts by the Fed later this year.

Monthly Increase: Consumer prices expected to rise by 0.4%, slightly up from January’s 0.3% increase, mainly driven by higher energy and gasoline prices.

Core Inflation Slowdown: February’s core inflation (excluding food and gas) anticipated to rise by 3.7% year-over-year, down from January’s 3.9%, with a monthly increase expected at 0.3%.

Shelter and Core Services Costs: Despite the expected deceleration in shelter costs, core inflation remains high due to persistent costs in shelter, insurance, and medical care.

OER Inflation: Bank of America predicts a narrowing gap between rent inflation and owners’ equivalent rent (OER) due to an expected slowdown in OER inflation, contrasting with last month’s acceleration.

Fed’s Rate Decision Outlook: Market anticipates the Fed to keep rates unchanged next week, with a significant expectation of rate cuts starting in June, influenced by core CPI outcomes.

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On Monday, the stock market saw mixed results as the recent rally slowed down. The S&P 500 and the Nasdaq Composite experienced declines, with technology stocks, including Super Micro Computer and Nvidia, facing notable losses. The Dow Jones, however, managed a slight increase. Concerns over the future performance of AI-related stocks and anticipation of the upcoming consumer price index report were key factors influencing the market’s movement. Additionally, the currency market observed the dollar index strengthening as investors awaited the CPI data, which could impact Federal Reserve’s rate decisions. Market analysts remain cautious, suggesting the Federal Reserve may need to maintain a careful approach to rate cuts in 2024.

Stock Market Updates

On Monday, the stock market experienced a slight downturn, interrupting the recent rally that had propelled major indexes to unprecedented heights. The S&P 500 edged down by 0.11% to close at 5,117.94, while the technology-heavy Nasdaq Composite dropped by 0.41% to end the day at 16,019.27. Both indexes recorded their second consecutive day of losses. Conversely, the Dow Jones Industrial Average managed to buck the trend by gaining 46.97 points, a modest increase of 0.12%, to close at 38,769.66.

In the tech sector, notable declines were seen in shares of Super Micro Computer, which fell by more than 5%, and Nvidia, down 2%, as investors began to question the sustainability of the recent surge in stocks linked to artificial intelligence. Meta Platforms, the parent company of Facebook, also faced a significant setback, dropping 4.4%. Additionally, the pharmaceutical giant Eli Lilly saw its stock decrease by over 3%.

These movements come as the market anticipates the release of the Consumer Price Index (CPI) for February, expected on Tuesday. According to forecasts by economists surveyed by Dow Jones, the CPI is projected to rise by 0.4% from January to February and by 3.1% on an annual basis. The core CPI, which excludes the volatile food and energy sectors, is anticipated to increase by 0.3% for the month and 3.7% annually.

Later in the week, the focus will shift to the producer price index, setting the stage for the Federal Reserve’s policy meeting in March. Some analysts, suggests that market optimism regarding the Fed’s capacity to cut rates in 2024 may be premature, with the upcoming inflation data likely reinforcing the need for a cautious approach by the Fed.

Currency Market Updates

In the currency markets, the dollar index saw a slight increase of 0.18% on Monday, stabilizing after the previous week’s decline. This adjustment comes as investors eagerly await the CPI report, which could clarify the current disparity between market expectations of nearly four rate cuts this year and the Fed’s December projections of three cuts.

The EUR/USD pair dipped slightly by 0.15%, maintaining its position above 1.0900 following a rally last week. The anticipation of the CPI data and its potential impact on the Federal Reserve’s next moves adds to the cautious sentiment observed in the currency markets.

Moreover, the New York Fed’s consumer survey highlighted rising inflation expectations over the next three to five years, predominantly among respondents with a high school education or less, further complicating the economic outlook.

As the financial world braces for the upcoming CPI report and its implications for interest rate decisions, the stock and currency markets reflect a mix of caution and anticipation. The outcomes of these economic indicators will likely play a crucial role in shaping the Federal Reserve’s policy direction in the coming months, with significant ramifications for investors and the broader economy.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD faces pressure as US dollar rebounds amid easing cycle anticipations

The US dollar’s modest rebound has put EUR/USD on the back foot, marking the start of the new trading week with its second day of losses. This comes as investors digest the latest US Non-farm Payrolls report, which showed a significant job addition but with a slight uptick in the jobless rate and a cooling in wage inflation. The dollar’s recovery is mirrored by a modest increase in US yields and the German 10-year bund yields climbing back to 2.30%.

Both the Federal Reserve and the European Central Bank are expected to begin their easing cycles in June, with the pace of interest rate reductions potentially setting them apart. Despite the ECB’s cautious stance, as expressed by Board member P. Kazimir, it’s unlikely to lag significantly behind the Fed in easing measures. With market expectations leaning towards a June rate cut, the economic fundamentals of the euro area, in comparison to the US’s resilience, suggest a stronger dollar in the medium term. This scenario could lead EUR/USD towards a deeper correction, initially aiming for its year-to-date low around 1.0700 and possibly extending towards late 2023 lows in the 1.0500 range.

Chart EUR/USD by TradingView

On Monday, the EUR/USD moved lower and was able to reach the middle band of the Bollinger Bands. Currently, the price is moving at the middle band, suggesting a potential consolidation movement and may create narrower bands. Notably, the Relative Strength Index (RSI) maintains its position at 57, signaling a neutral outlook for this currency pair.

Resistance: 1.0984, 1.1079

Support: 1.0907, 1.0812

 Economic Data