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U.S. stocks experienced a rebound on Tuesday, following a three-session decline, as investors eagerly awaited the release of crucial inflation data later in the week. The Dow Jones Industrial Average closed with a 0.93% gain, rising by 317.02 points to reach 34,261.42.
Similarly, the S&P 500 ended the day with a 0.67% increase at 4,439.26, while the Nasdaq Composite, focused on technology, gained 0.55% and closed at 13,760.70.
In related news, Salesforce’s stock soared by almost 4% after the company announced its plans to implement a price increase across all its offerings in August.
Furthermore, Activision Blizzard witnessed a 10% surge in its shares following a federal judge’s decision to deny the Federal Trade Commission’s request to halt Microsoft’s acquisition of the video game company. This ruling brought the two companies closer to finalizing their deal.
The upcoming release of the June consumer price index report on Wednesday and the June producer price index on Thursday is expected to provide insights into the trajectory of inflation and guide the future direction of interest rates.
Economists surveyed by Dow Jones project a 3.1% rise in the index on a year-over-year basis for last month. While investors anticipate another quarter-point increase at the Federal Reserve’s July meeting, uncertainty looms regarding the central bank’s actions in September, particularly after robust jobs data raised concerns about a potential resumption of rate hikes.
Looking ahead, the second-quarter earnings season is set to commence, with key reports expected from “systemically important financial institutions” such as JPMorgan Chase, Wells Fargo, and Citigroup, as well as BlackRock, PepsiCo, Delta Air, and UnitedHealth, a component of the Dow index, which will release its earnings on Friday.
On Tuesday, across all sectors, the stock market showed a positive trend with a 0.67% increase. The Energy sector performed exceptionally well, rising by 2.20%. Utilities and Industrials also experienced notable gains, with increases of 1.24% and 1.20% respectively.
Financials, Real Estate, and Communication Services sectors saw healthy gains of 1.19%, 1.17%, and 1.05% respectively. Materials and Consumer Discretionary sectors also contributed to the positive sentiment, with increases of 0.97% and 0.86% respectively.
However, the Information Technology and Consumer Staples sectors had more modest gains of 0.19% and 0.14% respectively. The Health Care sector remained relatively stable, showing no change at 0.00%.
Major Pair Movement
This downward trend comes ahead of the U.S. Consumer Price Index (CPI) report on Wednesday, with market sentiment remaining skeptical about the Federal Reserve’s ability to raise interest rates beyond one more hike, especially as other central banks are moving forward with their tightening cycles.
The upcoming inflation report will be closely watched to shape expectations regarding the Fed’s actions, which will have a significant impact on the value of the dollar. Forecasts indicate that the CPI is expected to decrease from 4.0% to 3.1%, mainly due to a favourable base effect that will turn unfavourable after July.
Additionally, on a monthly basis, a 0.3% increase is anticipated for both the CPI and core inflation, compared to 0.1% and 0.4% respectively in May. The year-on-year rate is projected to slide from 5.3% to 5.0%.
It’s worth noting that core inflation reached its peak last year in October, which will reduce the impact of the Fed-friendly base effect as we approach the end of the year. Regarding currency pairs, the EUR/USD remained stable after breaking above June’s peak and preparing for a pullback before the CPI release.
If the CPI results maintain the bund-Treasury yield spreads on the rebound, the next significant obstacle for the EUR/USD would be April’s 2023 peak at 1.1096. Market expectations currently include at least two additional 25bp European Central Bank (ECB) rate hikes before reaching a plateau, while the Federal Reserve rates are predicted to decrease by 1% between November and September of next year.
External factors like China’s actions and Brent crude oil prices reaching 10-week highs may influence growth, inflation, and currency movements. Furthermore, sterling experienced a substantial increase of 0.45%, reaching its highest level since April 2022 and approaching 76.4% of the dive observed in 2022-23 at 1.2941.
The market has priced in an additional 150bp of Bank of England (BoE) rate hikes by March. USD/JPY also saw a 0.6% increase following its recent decline, with expectations of a potential recovery in the coming months.
The EUR/USD pair rallied to a two-month high at 1.1027 before retracing slightly and finding support around 1.0980. Later, it regained strength above the 1.1000 level as the US Dollar weakened, while market participants eagerly awaited crucial US data.
Tuesday’s German ZEW survey revealed a decline in expectations and current conditions, aligning with a contraction in economic activity in the Eurozone. With the final German inflation numbers unchanged and an empty calendar for Wednesday, all eyes are now focused on the release of the US Consumer Price Index (CPI) for June.
Analysts anticipate a 0.3% monthly increase, a drop in the annual rate from 4% to 3.1%, and a decrease in the core index from 5.3% to 5%. The outcome of this data will likely impact market sentiment and potentially determine whether the EUR/USD pair can maintain its bullish bias or face downward pressure as attention shifts to the struggling Eurozone economy.
According to technical analysis, the EUR/USD pair experienced an upward movement on Tuesday, although it has not yet reached the upper band of the Bollinger Bands. Presently, the price is situated between the middle and upper bands of the Bollinger Bands, while the bands themselves are indicating a likelihood of further upward movement.
This suggests the potential for the price to reach the upper band of the Bollinger Bands. Additionally, the Relative Strength Index (RSI) currently stands at 69, further indicating a bullish trend for the EUR/USD.
Resistance: 1.1033, 1.1057
Support: 1.1002, 1.0965
XAU/USD (4 Hours)
Gold (XAU/USD) Prices Rise as Market Eyes US CPI Data Amidst Dollar Demand
Gold prices experienced an early advance on Tuesday, reaching a nearly month-long peak at $1,938.45. However, renewed demand for the US Dollar caused XAU/USD to trade in the $1,930 range during the American session.
The positive market sentiment, fueled by easing government bond yields and a favourable tone in equities during Asian trading, initially weakened the US Dollar. Nevertheless, the dollar rebounded despite this sentiment carrying over throughout the various sessions.
While Wall Street continues to extend its gains from Monday, financial markets remain cautious ahead of the release of the US Consumer Price Index (CPI). Analysts expect a 0.3% increase in inflation for June, compared to a modest 0.1% in May.
The annual figure is anticipated to be at 3.1%, down from the previous 4%, with the core annual reading predicted to decrease to 5% from 5.3% in the previous month. These CPI figures hold significance as they could provide insights into the future monetary policy decisions of the Federal Reserve (Fed).
Higher-than-expected inflation readings may prolong the central bank’s tightening measures, potentially strengthening the US Dollar across the board as investors seek safe-haven assets.
According to technical analysis, the XAU/USD pair is moving higher on Tuesday, creating upward momentum towards the upper band of the Bollinger Bands. Currently, the price is slightly below the upper band, suggesting the possibility of further upward movement today that could potentially breach the upper band. The Relative Strength Index (RSI) is currently at 69, indicating a potential bullish movement for XAU/USD.
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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The above data is for reference only, please refer to the MT4/MT5 software for specific data.
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The Dow Jones Industrial Average rebounded on Monday, recovering from a previous week of losses. Investors were optimistic ahead of upcoming inflation data and the start of the second-quarter earnings season.
The Dow rose by 0.62%, adding 209.52 points, while the S&P 500 increased by 0.24%, and the Nasdaq Composite saw a gain of 0.18%. This positive momentum ended a three-day losing streak for the major averages.
The consumer price index report is scheduled for Wednesday, followed by the producer price index on Thursday, which will provide further insights into inflation and wholesale price pressures.
Last week, the S&P 500, Nasdaq Composite, and Dow experienced declines of 1.16%, 0.92%, and 1.96%, respectively. Despite weaker-than-expected nonfarm payrolls in June, concerns over potential Federal Reserve rate hikes were raised due to slightly stronger-than-anticipated wage growth.
However, investors will be closely watching the quarterly reports of finance giants BlackRock, JPMorgan Chase, Wells Fargo, and Citigroup, which will mark the beginning of the second-quarter earnings season.
On Monday, all sectors in the market saw a modest overall increase of 0.24%. The Industrials sector performed the best, gaining 1.39%, followed by Health Care with a rise of 0.81% and Energy with a gain of 0.76%. Financials also had a positive day, increasing by 0.44%, while Real Estate and Consumer Discretionary sectors experienced smaller gains of 0.35% and 0.11% respectively.
Consumer Staples had a minimal increase of 0.03%. On the other hand, Materials and Information Technology sectors had slight declines of -0.01% and -0.02% respectively. Utilities and Communication services sectors performed the worst, with declines of -0.42% and -0.92% respectively.
Major Pair Movement
The dollar index experienced a decline of 0.29% as last week’s disappointing payrolls report continued to put pressure on Treasury yields, potentially leading to a further decrease in the U.S. currency. While Japanese Government Bond (JGB) and bund yields rose, Treasury yields fell, contributing to the downward trend.
Market sentiment was influenced by Fed speakers’ comments and a New York Fed survey indicating a decrease in household inflation expectations. The upcoming U.S. CPI report on Wednesday is highly anticipated, with the possibility that even a minor shortfall could result in a core inflation rate below 5%, which could support dovish views.
EUR/USD saw a gain of 0.26%, reaching its highest level since June, supported by a surge in the 2-year bund-Treasury yield spreads. Despite concerns about the eurozone investor mood and deflationary data from China, which could have negative implications for German businesses, the euro remained strong.
USD/JPY declined by 0.63% due to falling Treasury yields, with 10-year JGB yields approaching the Bank of Japan’s 50 basis points cap. The pair broke below key support levels, leaving speculators who were net long in a precarious position.
Sterling initially faced losses but eventually surpassed previous peaks, reaching its highest level since April 2022. Bank of England Governor Andrew Bailey emphasized the importance of combating UK inflation, which currently stands as the highest among the G7 countries.
AUD/USD and USD/CNH experienced minor declines of 0.2% and 0.02% respectively.
Picks of the Day Analysis
EUR/USD (4 Hours)
Weaker US Dollar Boosts EUR/USD as Market Awaits US Inflation Data
The EUR/USD pair continued its upward climb, propelled by a weaker US Dollar and positive momentum. The focus now turns to upcoming US inflation data, which is expected to shape the next direction for the pair. The US Dollar Index (DXY) fell to a three-week low, vulnerable to further losses due to declining inflation expectations and lower bond yields.
Additionally, the positive performance of Wall Street stocks exerted pressure on the US Dollar. Meanwhile, Eurozone data revealed a decline in the Sentix survey, suggesting weak GDP growth in the region.
According to technical analysis, the EUR/USD pair moved higher on Monday and created a push to the upper band of the Bollinger Bands. Currently, the price is moving just below the upper band with still wider bands, indicating a potential for further upside towards the upper band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 69, suggesting a bullish trend is in for the EUR/USD.
Resistance: 1.1033, 1.1057
Support: 1.1002, 1.0965
XAU/USD (4 Hours)
Spot Gold (XAU/USD) Prices Slide Amid Market Mood Swings and US Inflation Expectations
Gold prices experienced a downward trend, briefly reaching a low of $1,912.66 during London trading hours but recovering some losses following the opening of Wall Street. The initial strength of the US Dollar was fueled by concerns over China-US tensions and their impact on global growth.
However, a more positive sentiment during American trading hours led to a weaker USD as US stock indexes rebounded. With limited action in equities due to the absence of significant data, XAU/USD remained largely unchanged for the day.
The market focus remains on central banks’ monetary policies, particularly the potential extension of tightening measures, driven by policymakers’ concerns about persistent inflation. The upcoming release of the June Consumer Price Index (CPI) in the United States is expected to provide fresh insights into the Federal Reserve’s future actions, making it a significant event for financial markets.
According to technical analysis, the XAU/USD pair is moving flat on Monday, between the middle band and the upper band of the Bollinger Bands. Currently, the price is moving in a flat movement, suggesting that there’s a possibility that the price will move in a tight consolidation. The Relative Strength Index (RSI) is currently at 56, indicating a neutral stance for XAU/USD with a slight potential bullish movement.
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].
The financial world is poised for some key events this week with the potential to shake up markets. Top of the agenda is the upcoming decisions from various central banks on their interest rates.
Alongside this, the focus will be on the US as it releases its latest Consumer Price Index (CPI) and Producer Price Index (PPI). These important data points could provide crucial insights into the current economic climate.
Stay tuned as we delve into what the coming week holds in store.
Reserve Bank of New Zealand Rate Statement (12 July 2023)
The Reserve Bank of New Zealand raised its official cash rate by 25bps to 5.5% during its May meeting, marking the highest level since December 2008. This was the 12th consecutive rate hike.
Analysts predict that at the upcoming meeting on July 12, the RBNZ will keep its interest rates steady at 5.5%.
US Consumer Price Index (12 July 2023)
Consumer prices in the US saw a slight rise of 0.1% in May 2023, a slowdown from the 0.4% increase witnessed in the previous month.
Analysts anticipate a 0.2% rise for June 2023 data, scheduled for release on 12 July.
Bank of Canada Rate Statement (12 July 2023)
The Bank of Canada unexpectedly raised the target for its overnight rate by 25bps to 4.75% in June 2023, after pausing the tightening campaign in the previous two meetings.
The next rate statement will be released on 12 July 2023, with analysts anticipating another increase of 25bps to 5%.
UK Gross Domestic Product (13 July 2023)
The British economy expanded 0.2% month-over-month in April 2023, rebounding from a 0.3% drop in the previous month.
For May data, set to be released on 13 July, the country’s GDP is expected to be steady at 0.0%.
US Producer Price Index (13 July 2023)
Producer prices for final demand in the US decreased 0.3% month-over-month in May 2023, following a 0.2% rise in April.
For June 2023 data, set to be released on 13 July, analysts expect a 0.2% increase.
Prelim University of Michigan Consumer Sentiment (14 July 2023)
The University of Michigan’s consumer sentiment for the US was adjusted upwards to 64.4 in June 2023, its highest level in four months, up from an initial reading of 63.9.
For July preliminary data, analysts expect a reading of 64.5.
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 experienced a significant decline on Thursday as the release of stronger-than-anticipated jobs data heightened investors’ apprehension about the state of the economy and the trajectory of interest rates.
The Dow Jones Industrial Average dropped 1.07%, or 366.38 points, closing at 33,922.26, while the S&P 500 and Nasdaq Composite fell by 0.79% and 0.82% respectively. This marked the worst daily performance for both the Dow and S&P 500 since May.
With just Friday’s session remaining in the holiday-shortened trading week, all three major indexes are on track to end the week in negative territory, with the Dow poised for a 1.4% decline, and the S&P 500 and Nasdaq facing losses of 0.9% and 0.8% respectively.
In June, the private sector witnessed a substantial increase of 497,000 jobs, according to data from payroll processing firm ADP, surpassing the Dow Jones consensus estimate of 220,000. This robust gain, the largest since July 2022, exceeded expectations by a wide margin, especially when compared to the downwardly revised 267,000-job addition in May.
The market’s reaction to this positive news indicates that investors may now anticipate a stronger employment report, potentially prompting the Federal Reserve to resume its interest rate hikes after a pause in June.
Traders are pricing in a 92% chance of a rate hike at the central bank’s upcoming meeting, as suggested by CME Group’s FedWatch tool. Amidst these concerns, the Labor Department’s report showing a larger-than-expected decline in job openings in May provides a glimmer of hope that the tight job market could be showing signs of loosening.
On Thursday, the stock market experienced a broad decline across all sectors, with the S&P 500 index falling by 0.79%. The Information Technology sector showed the smallest decline at 0.16%, followed by Consumer Staples (-0.34%), Real Estate (-0.60%), and Materials (-0.71%).
Industrials and Health Care both dropped by 0.74% and 0.87% respectively. Financials and Communication Services had larger declines at 0.91% and 1.06% respectively, while Utilities experienced a more significant drop of 1.21%.
The Consumer Discretionary sector saw the largest decline of 1.65%. The Energy sector had the most substantial decrease, falling by 2.45% on Thursday. This widespread decline across sectors reflects the overall negative sentiment in the market on that day.
Major Pair Movement
USD/JPY experienced a 0.3% decline following a brief rally, as a combination of risk-off flows and caution ahead of the Non-Farm Payrolls (NFP) report limited gains. The pair struggled to reach the previous day’s high despite a temporary surge in 2-year Treasury yields, which retreated from the 16-year highs seen on Thursday.
The inability to sustain momentum, coupled with speculation surrounding potential Yield Curve Control (YCC) adjustments by the Bank of Japan’s Deputy Governor Uchida, weighed on USD/JPY. Market participants are now eagerly awaiting the NFP report, given the historically weak correlation between the ADP jobs data and the official payroll figures.
Positive outcomes on Friday could reinforce dip-buying strategies, while disappointing data may shift sentiment.
EUR/USD initially pierced the 10-day moving average and reached 1.0901 on EBS during early New York trading. However, the pair reversed course and turned negative as US yields and the US dollar rallied.
The market received a series of indicators pointing to a robust jobs market and a strong economy, subsequently increasing expectations for future Federal Reserve rate hikes, as implied by rates futures. The risk-off sentiment led to a decline in equities and gold prices, while USD/CNH saw gains.
Nevertheless, USD sellers emerged later, pushing EUR/USD into positive territory, hovering near 1.0880 by the end of the session. The formation of a daily doji candle reflects market indecision, with upcoming key data, particularly the US June jobs report and Average Hourly Earnings (AHE), poised to influence further direction. Should the data provide an optimistic outlook, EUR/USD bears may take control.
Picks of the Day Analysis
EUR/USD (4 Hours)
EUR/USD Rebounds from Three-Week Lows Amid Positive US Data, Lingering Downside Risks
The EUR/USD currency pair experienced a rebound from three-week lows near 1.0830, surging towards 1.0900 on Thursday. The recovery occurred twice during the European session and following the release of favourable US economic data.
However, despite the notable bounce, various factors such as risk aversion, positive US data, and technical indicators suggest that the downside risks persist for the EUR/USD. Key events in the Eurozone, including flat retail sales and a significant increase in German factory orders, alongside upcoming reports on industrial production and a speech by European Central Bank (ECB) representative De Guindos, could impact the currency pair’s trajectory.
Additionally, the positive surprises in US data, including a robust rise in ADP Private Employment and an increase in the ISM Service PMI, have further strengthened the US Dollar and contributed to the decline in Treasury bonds. The bond market is undergoing a repricing of central bank policies, with both US and European bond yields surging as a result.
According to technical analysis, the EUR/USD pair moved higher on Thursday and reached the middle band of the Bollinger Bands. Currently, the price is moving just above the middle band, indicating a potential for further upside towards the upper band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 51, suggesting a shift from bearish sentiment to a more neutral stance for the EUR/USD.
Resistance: 1.0926, 1.0965
Support: 1.0842, 1.0790
XAU/USD (4 Hours)
Spot Gold (XAU/USD) Prices Plunge as US Dollar Surges on Strong Employment Data and Risk Aversion
Gold prices experienced a significant drop on Thursday, as the XAU/USD pair traded as low as $1,902.62 per troy ounce. The decline was fueled by the US Dollar’s surge, driven by robust American employment-related data that sparked risk aversion and triggered a sell-off in stocks.
The Greenback also benefited from a resurgence in government bond yields, with the 2-year Treasury note reaching 5.12% before settling at 5.04%. The impressive employment figures in the US, including the ADP private jobs creation report surpassing expectations at 497K in June, along with a slight increase in Initial Jobless Claims and a decrease in job openings, indicate a tight labour market that supports the likelihood of further monetary tightening.
Additional positive data, such as an improved ISM Services PMI and upward revisions in S&P Global’s Services and Composite PMIs, underscore the resilience of the US economy and reinforce expectations of continued rate hikes by the Federal Reserve.
According to technical analysis, the XAU/USD pair is undergoing a downward movement on Thursday, approaching the lower band of the Bollinger Bands. Presently, the price is gradually rising from the lower band, suggesting a potential upward movement towards the middle band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 41, having declined from a higher level, indicating a neutral stance for XAU/USD with a slight bearish inclination.
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].
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