Energy commodities are like the unsung heroes behind our everyday routines, quietly driving the world forward. 

Imagine this: the energy in a single gallon of gasoline can power a bicycle for two weeks straight. Now, let’s think big—when you flip a light switch, charge your phone, or start your car, you’re tapping into the huge energy sources that keep our modern lives running. 

Now, here’s the eye-opening part: every day, a massive 100 million barrels of oil are used around the world. Wrap your head around that number—it fuels millions of homes, keeps countless vehicles on the move, and supports industries making everything from clothes to gadgets. This unending demand is what makes energy trading so captivating. 

In this guide, we’ll dive into the nitty-gritty of energy trading, making the confusing stuff simple and highlighting the tactics used by smart investors to navigate this ever-changing market. Whether you’re trying to improve your trading skills or expand your investments, this guide is here to give you the knowledge you need to make good choices. Join us as we explore the energy trading world, breaking down its complexity to uncover the amazing potential hidden in energy resources—one barrel at a time. 

Energy Commodities 

Think of commodities as the building blocks of the global economy—the things that make everything tick. We can split them into two main groups: hard commodities and soft commodities. And each of these groups has its own little subdivisions: 

• _{Energies: This is where we find stuff like crude oil, heating oil, gasoline, and natural gas.} 
• _{Precious Metals: This includes valuable things like gold, silver, and palladium, dug up from deep within the Earth.} 
• _{Agriculture: This is all about the crops we grow for food, like sugar and wheat, as well as stuff like timber for building.} 
• _{Livestock and Meat: This is about raising animals like cattle, sheep, and hogs. They can end up as food or be used for things like gelatine and leather.} 

Among these, energy is the real star. It’s super popular to trade because it’s what keeps our world spinning. Imagine if there was no energy—we’d be stuck without transportation, phones, computers, and all sorts of machines. That’s why energy trading is a big deal for investors like you. 

On the global stage, we have both renewable and non-renewable energy sources. These are things we can trade all over the world: 

• _{Renewable Energy: This is stuff like solar power, wind power, hydropower (that’s power from water), and geothermal power (from the Earth’s heat).} 
• _{Non-renewable Energy: This covers things like crude oil, petroleum products, natural gas, coal, and nuclear energy.} 

Understanding the Energy Trading Market 

The world of energy trading is a dynamic space where the exchange, buying, selling, and predictions about energy commodities unfold across the global financial stage. 

Through these interactions, benchmarks for the value of different commodities are set, influenced by a dance of factors that tug at the balance between supply and demand. Traders, guided by their predictions of energy price shifts, jump into or wrap up trading positions accordingly. 

When we dig into the factors driving the rollercoaster of energy prices, a few key points come to light: 

• _{Growth in emerging markets: While developed countries tend to have steady energy demands, emerging markets paint a different story. These up-and-coming regions are on a fast track of growth, and their energy needs are shooting up. This surge in demand is set to have a big say in how energy commodities are priced, especially for resources favoured by rapidly growing economies.} 

• _{Population growth: The path of global population growth has a hefty impact on energy prices. With Earth’s population expected to keep climbing, the race for available energy resources heats up. While this affects all countries, it’s a particularly big deal for giants like China and India. These places are dealing with booming populations and people flocking to cities, which cranks up their energy usage.} 
• _{Energy penetration: Despite energy having a wide reach, large chunks of the developing world still lack access to electricity. As these regions take steps forward economically and industrialise, energy access spreads like wildfire, and you guessed it—demand shoots up.} 
• _{Industrialisation and developing economies: The rise of new global players marks an era of supercharged industrialisation and the matching hunger for energy. The energy choices these rising powers make are pivotal, adding to the buzz around certain energy sources. For traders looking ahead, understanding the energy paths countries like China and India take to meet their energy needs is a must.} 
• _{Energy efficiency: On the horizon, energy trading faces the challenge of the developed world’s relentless quest for more energy-efficient ways. This involves swapping out old-school energy sources for clean, renewable options. The ripple effects include a possible slowdown in demand for non-renewable resources in developed countries, contrasted with a growing appetite for sources like solar and wind power.} 

How Energy Trading Works 

Navigating the energy trading market offers a multitude of paths for investors to explore, each with its distinct advantages and intricacies. Let’s embark on a journey to uncover these diverse approaches: 

Physical Commodities Trading 

One route involves direct engagement with tangible energy commodities such as oil, natural gas, or heating oil. This entails buying and selling the actual materials. However, this path is often less chosen by individual traders due to the challenges associated with logistics and storage. 

Energy Stocks 

Another avenue is investing in the stocks of energy companies. For instance, purchasing shares in major oil corporations lets you indirectly partake in the shifts of the energy market itself. 

Derivatives Trading 

Derivatives like energy CFDs (contracts for difference) and spread betting provide a way to speculate on energy price movements without having to own the underlying assets. These tools offer flexibility and the potential for gains in both upward and downward markets. 

Energy ETFs 

Exchange-traded funds (ETFs) are like investment bundles that group together energy-related stocks. This strategy grants you diversification by allowing you to invest in a broader slice of the energy market without needing to handpick individual stocks. 

How to Trade Energies with VT Markets? 

Energy commodity markets are known for their high volatility, offering opportunities for short-term gains and often serving as a safe haven for investors in uncertain times. 

To begin trading energy stocks, commodities, or ETFs, consider practicing in a risk-free environment. VT Markets provides an obligation-free demo account, allowing you to simulate opening and closing positions. With 90 days to explore, you can learn about energy trading dynamics and understand how factors affect prices, including oil CFDs and energy company stocks. 

In addition to monitoring price charts and trends, a robust energy trading strategy includes staying informed about breaking energy commodity news. Keeping up with the latest developments impacting the energy sector and reading expert analyses is crucial. 

Remember, trading energy stocks may require in-depth analysis, as stock movements don’t always directly mirror commodity prices. VT Markets offers daily market analysis to help you gauge the impact of breaking news on your portfolio. 

Ready to trade energies in a user-friendly live trading environment? VT Markets can have you up and running, opening your first position in just minutes. Create your live trading account today and explore the potential opportunities the energy market holds to elevate your portfolio. 

Summary: 

• _{Energy trading offers potential rewards due to constant demand and volatility.} 
• _{Energy commodities encompass hard and soft commodities, with energies like oil, natural gas, and renewables being prominent.} 
• _{Energy prices are influenced by factors like emerging markets, population growth, energy penetration, and industrialisation.} 
• _{Strategies for trading energy include physical commodities trading, energy stocks, derivatives trading (CFDs), and energy ETFs.} 

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].

Stocks started the final trading week of August on a positive note, with Wall Street striving to recover from a month of losses. The Dow Jones Industrial Average surged by 0.62%, gaining 213.08 points to close at 34,559.98. The S&P 500 climbed 0.63% to reach 4,433.31, and the Nasdaq Composite advanced by 0.84% to finish at 13,705.13. August has witnessed losses across all three indexes, with the S&P 500 declining by 3.4%, and the Nasdaq and Dow slipping by about 4.5% and 2.8% respectively. The tech sector, which suffered a 4.6% drop this month, made efforts to recover as certain tech giants like Meta, Apple, and Nvidia showed slight gains. Meanwhile, other sectors, such as 3M, made notable moves driven by company news.

The rally on Monday was characterized by a broader market participation, with 10 of the 11 sectors in the S&P 500 showing positive momentum. Notably, the rally appeared to favor cyclical stocks over tech, as investors responded to stronger-than-expected growth beyond the U.S. borders. The positive sentiment followed Federal Reserve Chair Jerome Powell’s recent remarks, in which he indicated cautiousness in proceeding with further interest rate hikes despite signs of ongoing economic growth and robust consumer spending. Traders were assigning over a 20% probability of another rate hike during the upcoming September meeting. The week ahead holds significance with the release of the Fed’s preferred inflation gauge, the personal consumption expenditures index, and fresh non-farm payroll data.

Data by Bloomberg

On Monday, the overall market saw a positive movement of 0.63%. The Communication Services sector led the gains with a notable increase of 1.05%, followed by Information Technology at 0.81% and Industrials at 0.78%. Real Estate, Materials, and Energy sectors also displayed positive growth, each rising by 0.77%, 0.74%, and 0.73% respectively. Financials experienced a moderate gain of 0.59%, while Consumer Staples and Consumer Discretionary sectors showed more modest increases of 0.46% and 0.37%. Health Care saw a slight uptick of 0.23%, while the Utilities sector had a minor decrease of -0.04%.

Major Pair Movement

The dollar index showed a slight decline on Monday as London observed a bank holiday. Investors grappled with mixed messages from central bankers following the Jackson Hole symposium. While the Bank of Japan (BoJ) Governor leaned dovish, other central banks left their stance ambiguous. The market eagerly awaited upcoming key data releases for clearer guidance.

A rebound in risk appetite, partially triggered by China’s efforts to bolster its slowing growth and curb investment outflows, had a minor impact on safe-haven currencies like the dollar and yen. Meanwhile, risk-sensitive currencies such as the Australian dollar and sterling received support, rising by 0.27% and 0.19% respectively. EUR/USD gained 0.12%, and USD/JPY remained relatively stable.

Following the Jackson Hole event, the Federal Reserve is likely to raise rates by 25 basis points at its November meeting if U.S. data remains robust. The European Central Bank (ECB), facing weaker euro zone data and inflation concerns, may raise rates by 25 basis points as early as September. Fed Chair Jerome Powell emphasized the need for more data before considering rate hikes, while ECB President Christine Lagarde highlighted potential inflation risks. With the focus on upcoming euro zone and U.S. data, market attention is on economic indicators, including CPI, core PCE, employment data, and ISM manufacturing reports for August. The dollar’s trajectory against the yen depends on U.S. data and Treasury yields, while sterling remained relatively unaffected by hawkish comments from the Bank of England Deputy Governor, already priced in due to inflation concerns.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Rises Amid Weaker US Dollar, Markets Anticipate Key Economic Data

The EUR/USD currency pair experienced a modest increase on Monday, benefitting from a softened US Dollar after recording its lowest close since mid-June following Jerome Powell’s Jackson Hole speech. As crucial economic reports loom, there’s potential for increased market volatility.

The US Dollar started the week on a weaker note, driven by an improved market sentiment supported by China’s additional measures. This led to gains in US and European stocks and a decline in government bond yields. This environment weighed on the US Dollar, causing the US Dollar Index to retreat towards 104.00.

In terms of economic data, the Dallas Fed Manufacturing Index exhibited improvement, albeit not overwhelmingly positive. Attention is now focused on forthcoming employment and inflation data. The week’s agenda includes the release of the JOLTS Job Openings report. Similarly, European markets are keenly awaiting inflation reports, with preliminary August Consumer Price Index (CPI) data set to be unveiled across Eurozone countries. Additionally, the German Gfk Consumer Confidence survey is due for release. The convergence of these data points suggests the potential for market-moving shifts.

Chart EURUSD by TradingView

In line with technical analysis, the EUR/USD moves slightly higher on Monday, reaching the middle band of the Bollinger Bands. Currently, the price is moving slightly above the middle band, showing that there’s potential for another higher movement to target the upper band. The Relative Strength Index (RSI) is currently at 49, signaling that EUR/USD is trying to move back to the neutral stance.

Resistance: 1.0874, 1.0935

Support: 1.0789, 1.0740

XAU/USD (4 Hours)

XAU/USD Surges to Three-Week High as China Initiates Measures, Market Eyes Economic Data

Spot Gold experienced a surge against the US Dollar, propelling the XAU/USD pair to a three-week high at $1,926.04 per troy ounce. The week commenced with financial markets closely observing China’s moves to bolster the Yuan. China’s economy, grappling with challenges since abandoning the zero-covid policy in December 2022, has struggled to regain pre-pandemic growth levels.

China’s reduction of the stamp duty on stock trading by 50% over the weekend, coupled with a higher-than-expected fixed rate for USD/CNY set by the People’s Bank of China (PBoC), exerted downward pressure on the USD, leading to minor losses against major counterparts. Despite this, the USD maintained its position near recent highs across currency markets. Gold experienced an uptick during the American session, partly influenced by rising government bond yields and a retreat in US indexes from their intraday highs.

However, Gold’s intraday gains were mostly reined in as market participants await key news for clearer market direction. The upcoming macroeconomic calendar features significant data releases, including Germany and the Euro Zone’s preliminary estimates of the Harmonized Index of Consumer Prices (HICP) for August. Likewise, the United States is set to publish the July Core Personal Consumption Expenditures (PCE) Price Index, a preferred inflation gauge by the Federal Reserve, along with multiple employment indicators leading up to the eagerly anticipated August Nonfarm Payrolls report on Friday.

Chart XAUUSD by TradingView

Using technical analysis, the XAU/USD moves slightly higher on Monday and trying to widen the bands for the Bollinger Bands. Currently, the price is trying to push the upper band higher showing there’s potential for Gold to move even higher. The Relative Strength Index (RSI) is at 65 currently, showing that the XAU/USD pair is still in a positive mode.

Resistance: $1,926, $1,945

Support: $1,910, $1,896

Economic Data

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].

This week, keep a close watch on Australia’s Consumer Price Index (CPI), the US Core Personal Consumption Expenditure (PCE) Price Index, and the US Jobs Report. These indicators could substantially impact market sentiment, amplifying the need for traders to exercise caution and stay well-informed to optimise their trading efforts throughout the week.

Here are some market highlights for the upcoming week:

US JOLTS Job Openings (29 August 2023) 

Figures from the US Job Openings and Labour Turnover Survey (JOLTS) indicate that the number of job openings in the US fell by 34,000 to 9.58 million in June 2023, the lowest level since April 2021.

The figures for July 2023 will be released on 29 August, with analysts expecting a slight drop to 9.57 million.

Australia’s CPI (30 August 2023)

Australia’s Consumer Price Index was up by 5.4% in June 2023, easing from the 5.5% rise observed in May 2023. 

Analysts predict a slower growth rate of 5.2% in the figures for July 2023, set to be released on 30 August.

US Core PCE Price Index (31 August 2023) 

Core PCE prices in the US, excluding food and energy, experienced a 0.2% increase in June 2023, easing from the 0.3% rise seen in May 2023.

The data for July 2023 is set to be released on 31 August, with analysts expecting a 0.2% growth.

US Jobs Report (1 September 2023)

The US economy created 187,000 jobs in July 2023, while the unemployment rate decreased to 3.5%. 

The figures for August 2023 will be released on 1 September, with analysts forecasting the addition of 180,000 more jobs. The unemployment rate is expected to maintain its level at 3.5%.

ISM Manufacturing PMI (1 September 2023 )

The ISM Manufacturing Purchasing Managers’ Index (PMI) for the US rose to 46.4 in July 2023 from 46 in June 2023. 

Analysts predict a reading of 46.6 in the index for August 2023, scheduled for release on 1 September.

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].

In a dramatic turn of events, the stock market experienced a sharp decline following a brief surge triggered by Nvidia’s impressive quarterly results. As the tech rally faded, investors also braced themselves for a significant address from Federal Reserve Chairman Jerome Powell. The Dow Jones Industrial Average closed with a hefty loss of 373.56 points, marking a 1.08% drop to settle at 34,099.42. Similarly, the S&P 500 witnessed a substantial decline of 1.35%, concluding the day at 4,376.31, while the Nasdaq Composite, renowned for its tech-heavy constituents, plunged by 1.87% to reach 13,463.97.

This Thursday brought forth the Dow’s most challenging day since March, while the S&P 500 and Nasdaq encountered their most significant single-day losses since August 2nd. Nvidia, a prominent tech player, reported better-than-expected earnings and revenue, propelling its shares to an all-time high. Although the company’s leadership projected a remarkable third-quarter revenue increase of 170% year-over-year, the stock only managed a meager 0.1% gain by the closing bell. Meanwhile, the tech sector faced a notable setback, causing the S&P 500’s largest loss of 2.15%. Renowned tech giants like Amazon, Apple, and Netflix saw their shares decrease during the session, with losses ranging from 2.6% to 4.8%. As the market awaits Powell’s speech, U.S. Treasury yields climbed, touching 4.241% for the benchmark 10-year Treasury note.

Data by Bloomberg

On Thursday, all sectors of the stock market experienced a decline of 1.35%. Among the various sectors, technology and communication services were hit the hardest, both dropping by 2.15% and 2.04% respectively. Consumer discretionary also faced a substantial decrease of 2.01%. Industrials followed with a decline of 1.22%. Health care, energy, and utilities sectors recorded losses of 0.76%, 0.74%, and 0.63% respectively. Financials, real estate, and materials sectors had more modest declines, each decreasing by 0.24%, 0.41%, and 0.43%. The consumer staples sector also saw a decrease of 0.77% in its value.

Major Pair Movement

The US Dollar Index rebounded and surged above 104.00, marking its highest point since early June after a brief correction. This resurgence was fueled by fundamental factors, risk aversion, and higher US Treasury yields, all of which contributed to the strengthening of the Greenback. All eyes are on the Jackson Hole event, with European Central Bank President Christine Lagarde and Federal Reserve Chair Jerome Powell scheduled to speak. Their speeches are anticipated to induce volatility and potentially lead to significant movements in financial markets. Despite mixed data from the US on Thursday, including a 5.2% decline in July’s Durable Goods Orders (versus an expected -4%) and a lower than expected initial Jobless Claims of 230K (versus 240K expected), the US Dollar remained resilient. The University of Michigan’s Consumer Sentiment report is expected to be released on Friday. Additionally, Federal Reserve officials’ comments varied, with some suggesting that policy actions may have been sufficient, while others warned of the possibility of further rate hikes.

The 10-year US Treasury yield rebounded to 4.2%, though it remained below recent peaks, while the 2-year yield climbed back above 5%. These rising yields exerted pressure on the Japanese Yen, causing USD/JPY to rise from 144.65 to 145.85, poised for Jerome Powell’s speech. Meanwhile, EUR/USD retreated to 1.0800, trading with a bearish bias just above the 200-day Simple Moving Average (SMA). ECB President Christine Lagarde’s speech at Jackson Hole and upcoming data on German Q2 GDP and the IFO Survey are awaited. USD/CHF consolidated above 0.8800, achieving its highest daily close in a month around 0.8850, as Switzerland prepared to release Q2 employment data. Conversely, GBP/USD resumed its downtrend, slipping below 1.2600 after failing to hold above the 20-day SMA at 1.2740. In the Antipodean region, AUD/USD reversed its gains from Wednesday and neared the 0.6400 mark, while NZD/USD struggled to regain 0.6000 and dropped to 0.5920, both currencies facing pressure amidst cautious market sentiment.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Nears Crucial Levels Amidst Dollar’s Resurgence Ahead of Powell’s Jackson Hole Speech

The EUR/USD currency pair has edged back towards significant technical thresholds following a brief rebound that faltered near 1.0870. This pullback occurred as the US Dollar regained strength in anticipation of Federal Reserve Chair Jerome Powell’s imminent address at Jackson Hole on Friday. Despite mixed data from the US and no definitive cues from Fed officials, the Greenback managed to strengthen. US stocks saw declines, while US Treasury yields rebounded, contributing to the Dollar’s resurgence. US economic indicators revealed a notable 5.2% drop in Durable Goods Orders for July, exceeding the anticipated 4% decrease. Furthermore, Initial Jobless Claims declined to 230,000, surpassing the projected 240,000 figure.

European Central Bank (ECB) Governing Council member Mario Centeno delivered a cautionary stance on Thursday, expressing the need for prudence in upcoming meetings. He highlighted the realization of downside risks to the economy, aligning with the prevailing downtrend in expectations for additional monetary policy tightening from the ECB. These dovish remarks have potentially contributed to the EUR/USD’s weakness. As the week progresses, Germany is set to release updated data on Q2 GDP and the ZEW Survey, while the University of Michigan’s Consumer Sentiment Survey will be a focal point in the US. However, all eyes remain fixed on Jackson Hole, where ECB President Christine Lagarde will speak at 11:00 GMT, followed by Fed Chair Jerome Powell at 14:00 GMT. These speeches have the potential to trigger substantial market movements across various sectors.

Chart EURUSD by TradingView

In line with technical analysis, the EUR/USD declined on Thursday, reaching the lower boundary of the Bollinger Bands. At present, the price is hovering close to this lower boundary. The Relative Strength Index (RSI) is currently at 34, signaling a return to bearish sentiment for the EUR/USD.

Resistance: 1.0874, 1.0935

Support: 1.0789, 1.0740

XAU/USD (4 Hours)

XAU/USD Maintains Rally Near $1,923 Amid Dollar’s Volatile Performance

Spot Gold continued its weekly ascent, reaching $1,923.34 per troy ounce and sustaining modest intraday progress, just below this mark during the mid-American session. The US Dollar experienced selling pressure throughout the first half of the day, influenced by a decline in government bond yields and favorable stock market performance.

The USD briefly garnered demand following the release of mixed US data. Durable Goods Orders endured a substantial 5.2% plunge in July, significantly worse than anticipated. Conversely, Initial Jobless Claims for the week concluding on August 18 displayed improvement at 230K, surpassing the expected 240K. The July Chicago Fed National Activity Index also signaled a shift, rising to 0.12 from the previous month’s -0.33.

Macro figures triggered a decline in stock markets, causing Wall Street to further retreat after the opening bell. Despite optimistic remarks from Federal Reserve (Fed) officials, including Boston Federal Reserve President Susan Collins mentioning a possible steadying of the policy rate and Federal Reserve Bank of Philadelphia President Patrick Harker suggesting the Fed might have “done enough” with monetary policy, the market mood dampened. The USD found strength amid this sentiment, further supported by improved Treasury yields, which in turn curbed the extension of gains for XAU/USD (the Gold/US Dollar pair).

Chart XAUUSD by TradingView

Using technical analysis, the XAU/USD didn’t change much on Thursday and stayed between the higher and middle bands of the Bollinger Bands. Right now, the price is still in that same zone between the middle and upper bands. The Relative Strength Index (RSI) is at 61 currently, showing that the XAU/USD pair is still in a positive mode.

Resistance: $1,926, $1,945

Support: $1,910, $1,896

Economic Data

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].

Stocks closed higher on Wednesday as investors awaited Nvidia’s latest quarterly earnings report, with the company being a top performer in the S&P 500 due to its association with the artificial intelligence trend. The Dow Jones Industrial Average rose by 0.5%, the S&P 500 had its best daily performance since June 30 with a 1.1% gain, and the Nasdaq Composite climbed 1.6% for a third consecutive day of gains. Nvidia’s report was anticipated to show substantial year-over-year increases in profit and revenue. Investors are keen on the results to gauge the continued momentum of the AI trend, which has propelled Nvidia’s significant stock gains. The benchmark 10-year Treasury yield’s decline by over 11 basis points to 4.21% was also well-received by traders, while concerns over inflation and slowing demand negatively affected athletic apparel stocks like Nike and Foot Locker.

Investors are keeping an eye on Nvidia’s earnings report as the company’s stock has surged over 200% in 2023, largely due to its AI-related prospects. The positive sentiment on Wall Street was further boosted by a decline in the 10-year Treasury yield, which fell by more than 11 basis points to 4.21%. However, athletic apparel stocks faced challenges amidst worries about inflation and decreasing demand, with Nike experiencing its longest losing streak on record and Foot Locker reporting shrinking sales and reducing its forecast. The anticipation of the Federal Reserve symposium in Jackson Hole, Wyoming, and Fed Chair Jerome Powell’s upcoming remarks also drew attention from investors. The market’s short-term direction is seen to hinge significantly on Nvidia’s earnings and how it reflects the AI trend’s momentum, with cautionary notes about stretched valuations and potential market implications in the face of changing economic conditions.

Data by Bloomberg

On Wednesday, across all sectors, the market witnessed a positive movement with a gain of 1.10%. The Information Technology sector showed strong growth, leading with a substantial increase of 1.92%, closely followed by the Communication Services sector, which also surged by 1.90%. The Real Estate sector experienced a notable rise of 1.46%, while the Industrials sector saw a more moderate gain of 0.99%. Financial and Consumer Discretionary sectors exhibited growth of 0.93% and 0.83% respectively. The consumer Staples and Utilities sectors showed smaller yet positive increases of 0.63% and 0.45% respectively. The Health Care and Materials sectors saw minor gains of 0.29% and 0.18% respectively. However, the Energy sector faced a decline of -0.30% on the same day.

Major Pair Movement

The US Dollar saw a significant decline, marking its weakest performance since early August, with the Dollar Index (DXY) falling below 103.50 from its recent high around 104.00. This correction was driven by weaker-than-expected US PMI figures and a pullback in US Treasury yields, notably the 10-year yield dropping below 4.20%. The risk-on sentiment was boosted, leading to gains in major indices like the Dow Jones and Nasdaq. The anticipation of Fed Chair Powell’s speech at the Jackson Hole Symposium is notable, as it could shape upcoming policy directions. The Eurozone experienced a drop in the Composite PMI, indicating a contraction, likely impacting ECB projections and hinting at potential policy adjustments. Similarly, the UK’s Composite index fell below 50, weakening GBP/USD and boosting EUR/GBP. The Japanese yen gained ground against the US dollar due to lowered expectations of tightening by central banks, and the Australian dollar rebounded despite disappointing PMI data. Precious metals like gold and silver surged, while cryptocurrencies, including Bitcoin and Ethereum, enjoyed gains due to improved risk sentiment.

Despite its recent highs, the US Dollar weakened notably due to disappointing US PMI data and a decrease in US Treasury yields. The risk-on sentiment was evident in the positive performance of stock indices, and market participants are looking forward to Fed Chair Powell’s speech. The Eurozone and the UK both showed signs of economic contraction, influencing currency dynamics. The Japanese yen benefited from reduced tightening expectations, while the Australian dollar rebounded despite weak data. Precious metals and cryptocurrencies also experienced positive shifts in line with the risk sentiment.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Rebounds on Weaker Dollar, Eurozone PMI Impact, and Upcoming Central Bank Speeches

The EUR/USD exhibited a rebound, finding support above the 200-day Simple Moving Average and driven by a weakened US Dollar. The recovery from the 1.0800 level has brought the pair to test the 1.0870 area, although the overarching trend remains downwards. The Euro’s decline was initially triggered by the Eurozone’s preliminary August PMI figures, with the Composite dropping from 48.6 to 47, indicating contraction. Surprisingly, Services PMI dipped to 48.3 while Manufacturing PMI rose to 43.7. This data has dampened expectations for a September rate hike from the European Central Bank (ECB), influencing the Euro’s performance.

In the US, Wednesday’s data revealed a drop in the S&P Global Composite PMI from 52 to 50.4, with Manufacturing PMI falling to 47, contrary to expectations. The Services PMI also slipped from 52.3 to 51. These figures led to losses in the US Dollar, prompting a corrective movement. Additionally, US Treasury yields retreated, contributing to a weakened Dollar and aiding the EUR/USD pair’s rebound. Looking ahead, attention remains on the Jackson Hole Symposium, particularly speeches by Fed Chair Powell and ECB President Lagarde on Friday, even as Thursday’s data includes weekly Jobless Claims and Durable Goods Orders.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD moved higher on Wednesday and managed to reach the middle band of the Bollinger Bands. Currently, the price is slightly below the middle band of the Bollinger Bands. The Relative Strength Index (RSI) currently stands at 47, indicating that the EUR/USD is currently back in a neutral mode.

Resistance: 1.0935, 1.1038

Support: 1.0837, 1.0789

XAU/USD (4 Hours)

XAU/USD Surges as Dollar Softens Amidst Retreat in Yields and Positive Asian Markets

On Wednesday, spot gold experienced a notable shift, surging towards the $1,920 price range. The US Dollar exhibited a weakened stance through the first half of the day, influenced by declining government bond yields. Despite negative cues from American stock markets, Asian markets demonstrated resilience and moved higher.

European indices maintained an optimistic outlook despite unfavorable news for the Euro Zone. S&P Global’s preliminary August PMI estimates indicated a much worse situation than anticipated, revealing the region’s fastest contraction in business activity in over two years. The USD’s decline continued after the release of US figures, where the Manufacturing PMI reached a two-month low of 47.0, and services output dropped to a six-month low of 51.0. American stocks held their ground in positive territory, while Treasury yields retreated further, with the 10-year Treasury note now offering 4.20%, down by 12 basis points (bps).

Chart XAUUSD by TradingView

Based on technical analysis, the XAU/USD moved higher on Wednesday and was able to reach the upper band of the Bollinger Bands. Currently, the price is moving just around the upper band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 67, indicating that the XAU/USD pair is now in bullish mode.

Resistance: $1,926, $1,945

Support: $1,910, $1,896

Economic Data

VT Markets is a global, multi-asset brokerage company specializing in Contract for Differences (CFD) and Foreign Exchange Market (Forex) trading. The Australia-based company has spent almost a decade building an innovative and trusted brand for retail traders, with over 200,000 active clients from more than 160 countries, and an average daily trade volume of over 4 million trades every month — traders can open an account with VT Markets in as little as five minutes.

Forex trading has reached new highs, with a daily turnover of $7.5 trillion in 2022, up from $6.6 trillion in 2019. There are approximately 10 million Forex traders globally.

Brokerage firms like VT Markets can often help traders with everything from the mechanics of the trade to providing advice on how to make smart investment decisions. For traders, it is important to find a brokerage firm that they can trust and which has the financial instruments and the platform to support them in their trading. 

VT Markets’ Mission Of Accessible Trading

VT Market is setting out to build a reliable, accessible platform that can serve all traders. Mobile app trading has been growing in popularity, with over $22 billion in revenue generated by app trading in 2022. Additionally, over half of all Forex traders prefer trading using a mobile device or app. VT Markets gives its traders a variety of platforms to choose from, including the popular MetaTrader 4 and 5 platforms, as well as WebTrader, WebTrader+ and the VT Markets app.

The level of accessibility the platform offers is one of its key differentiating factors, with many competitors carrying far more restrictions on instruments and requirements. VT Markets provides its users with access to over a thousand financial instruments that allow them to trade almost every asset class — including Commodities, Gold and ETFs. 

The brokerage is the recipient of numerous brokerage awards, including Best Forex Broker Europe 2023 Awarded by Forex Awards, Fastest Growing Broker Europe 2023 Awarded by Global Business Review Magazine, Best Multi-Asset Broker MENA 2023 Awarded by International Business Magazine and more.

The company believes all these awards are a recognition of its stated mission “to make trading easy and accessible for everyone.” VT Markets is looking to become one of the easiest-to-use trading solutions that provides retail traders with a comprehensive set of tools within a safe, regulated environment. This includes up to 500:1 trading leverage, a robust account management portal, and even potential extra trading bonuses. 

Getting started with VT Markets is as simple as 1) applying for an account, 2) selecting a payment method, and 3) begin trading with VT Market’s thousands of financial instruments across all asset classes. Traders can start an account in as little as five minutes – click here to create an account with VT Markets. 

Learn more about VT Markets by visiting its website. 

Featured photo by Joshua Mayo on Unsplash.

This post contains sponsored content. This content is for informational purposes only and not intended to be investing advice.

About VT Markets:

VT Markets is a global multi-asset broker, providing access to a wide range of financial markets for traders and investors worldwide. With a strong commitment to innovation, technology, and client satisfaction, VT Markets offers competitive trading conditions, advanced trading platforms, and a comprehensive suite of educational resources. As a responsible corporate citizen, VT Markets is dedicated to making a positive impact on society through its corporate social responsibility initiatives.

For more information, please visit the official VT Markets website. Alternatively, follow VT Markets on Meta, Instagram, or LinkedIn.

For media enquiries and sponsorship opportunities, please email [email protected]