USA100 – Eyes on Earnings Data, But No Clear Direction Seen Yet!

Posted on April 18, 2024 by Michalis Efthymiou

The NASDAQ trades with no gains or losses and this can also be understood when monitoring the most influential components. From the top 15 most influential components (stocks) 6 are currently trading lower. Ideally investors looking to purchase wish to see 75% of components rising and “shorters” wish to see 75% in the decline. Currently, neither is being experienced, but investors will wait to see if such an opportunity to develop once the US session opens at 13:30 GMT.

NASDAQ’s recent decline has been predominantly influenced by two factors: indications of prolonged higher interest rates and the Middle East conflict. The latter has led to diminished investor sentiment and concerns regarding higher inflation. Regarding the Federal Reserve’s monetary policy, market expectations for a June rate cut, previously at 72%, fell to a mere 16% due to elevated inflationary pressures and a resilient US economy. According to the CM Exchange, an adjustment is now anticipated to occur in September 2024.

Meta is one of the stocks which are currently within the sptotlight. The company has decided to pay dividends to shareholders for the first time and continues to be one of the better performing stocks. In anticipation of the publication of the financial report, many institutions began to revise their estimates. Truist Securities experts adjusted the forecast from a target price of $525 to $550. Analysts believe that the company is actively introducing new advertising monetization opportunities based on a higher volume of impressions.

In the meantime, investors will continue focusing on upcoming earnings reports. These include Netflix, Alphabet, Tesla, Microsoft, Amazon as well as Meta. These quarterly earnings reports are also likely to increase volatility. If the USA100 crosses above $17,623.60, and earnings beat expectations, the USA100 could develop a bearish bias.

Microsoft – Quarterly Earnings expected to fall 3%. +11.05% in 2024.
Alphabet – Quarterly Earnings expected to fall 8%. +12.41% in 2024.
Netflix – Quarterly Earnings expected to increase 100%. +31.00% in 2024.
Amazon – Quarterly Earnings expected to fall 16%. +21.00% in 2024.
Meta – Quarterly Earnings expected to fall 18%. +42.70% in 2024.
Tesla – Quarterly Earnings expected to fall 29%. -37.42% in 2024.

How Long Can The ECB Hold Off A Rate Cut?

Posted on April 3, 2024 by Michalis Efthymiou

Yesterday, the EURUSD experienced a significant bullish surge, standing out among all pairs in terms of price action clarity and strength. This can be attributed largely to the absence of conflicting price conditions. During this period, the Euro gained value against all currencies, while the US Dollar Index notably declined. However, investors should remain mindful of factors indicating ongoing Dollar strength.

A primary concern revolves around the inflation rate in the Eurozone, particularly notable in Germany where inflation has dipped to nearly its lowest level in three years, hovering close to its target. Recent data shows a decrease in inflation from 2.7% to 2.3%, with Core Inflation dropping to 3.3%. Despite elevated energy prices, inflationary pressures persistently wane in Europe. Consequently, economists anticipate a swifter adjustment to interest rates to meet specific targets, such as stimulating economic growth and averting disinflation. Should interest rates indeed decrease, the Euro may face downward pressure similar to the situation in 2022 when the ECB abstained from rate hikes.

The European Central Bank’s interest rate decision is scheduled for the 11th. With no further EU data slated for release in the coming days, investor focus will shift primarily to the US, particularly regarding the potential for Fed rate cuts. The latest release for the US Dollar is the US ADP Non-Farm Employment Change which read higher than expectations. The NFP Employment Change rose from 140,000 to 184,000 and beat expectations. This is known to support the US Dollar, but price action must also indicate this.

Should data surpass expectations and indicate a resilient US economy, the US Dollar could strengthen. The upcoming official employment data on Friday, along with any remarks from Federal Open Market Committee members, will be closely watched. Furthermore, the Fed Chairman’s informal engagement with journalists later today will draw attention, especially regarding insights into the regulator’s future actions.

Examining longer-term timeframes, such as the popular 2-hour chart, the EURUSD price trajectory continues to suggest a downward trend. Trading below the 75-bar EMA, price action consistently aligns with a bearish pattern. A breach below 1.07682 could trigger sell signals, signalling a looming downturn.

The SNP500 Renews Its All-Time Highs As Chinese Data Rebounds!

Posted on April 1, 2024 by Michalis Efthymiou

The USA500 starts the day with a moderate bullish impulse wave but loses momentum and trades sideways thereafter. The index is currently trading 0.41% higher than the most recent close. The price of the index is now trading at an all-time high and has risen more than 10.50% in 2024. The SNP500 has also been the best performing index in 2024 and has outperformed both the NASDAQ and Dow Jones. However, the index does offer a lower annual dividend yield.

One favorable aspect for the USA500 is the anticipated action by the Federal Reserve and other major central banks to begin reducing interest rates at some stage within this year. A crucial aspect for investors to observe is that these central banks managed to take this step without causing a notable economic downturn, a goal successfully attained. Additionally, another positive aspect is that the Core PCE Price Index did not surpass expectations, which is crucial given that inflation has been consistently higher than previously estimated for the past two months.

However, some risks do remain which can make the path difficult for individuals looking to speculate the price increase. The price of Gold as well as the US Dollar continue to rise. This occurrence indicates the market’s risk appetite and sentiment is lower than priced in the stock market. Another concern is whether the Federal Reserve will be able to indeed cut interest rates in July 2024 if inflation does not decline over the next 2 months.

Investors are closely watching the price of oil which is trading 13.50% higher in 2024 and at a 6-month high. If the price of Oil continues to rise and fails to fall back below $80.00 per barrel in the next two months, inflation will be difficult to reduce. As a result, the Fed may again push back a rate cut to July or September. Otherwise, the Fed may continue with a cut in June, but will advise less than 3 cuts for the remainder of the year.

Investors are worried about Apple stocks due to hefty EU penalties and an impending US lawsuit. They eagerly await the board’s response and its impact on earnings per share. The performance of the Apple Vision Pro Headset, launched in February, is also crucial. If sales meet or exceed expectations, stock demand may rise despite looming fines. Additionally, Apple plans to globally release the product in the summer. Keep an eye on Apple’s quarterly earnings on May 2nd and Microsoft’s on April 23rd.

EURUSD Analysis – Is the Fed More Hawkish Than Previously Thought?

Posted on March 28, 2024March 28, 2024 by Michalis Efthymiou

Recent statements from Federal Reserve members are bolstering the US Dollar, although there is divergence in forward guidance within the Fed. While the Chairman suggests the Fed may soon feel comfortable reducing rates without requiring much additional evidence, Fed Governor Mr. Waller advises a more cautious approach, preferring to wait for a few months of data before deciding on the next steps. Consequently, upcoming inflation and employment figures will remain crucial and could potentially delay rate hikes further. Economists predict the Federal Reserve will decrease interest rates three times this year, yet the timing of the initial cut is uncertain and subject to change based on forthcoming data.

A positive note for traders is the absence of conflicting currencies in the EURUSD exchange. The US Dollar is currently trading 0.12% higher, while the Euro is weakening against most other currencies, trading 0.06% lower against the Pound and the Canadian Dollar, and 0.16% lower against the Japanese Yen. Yesterday, Mr. Cipollone, the head of the Bank of Italy, expressed confidence that inflation would return to the 2.0% target by mid-2025. He also advocates for lowering interest rates and intends to utilize this as a basis for adjusting monetary policy. The Euro is facing downward pressure as investors anticipate challenges for the European Central Bank in avoiding cuts if the Fed delays its adjustments.

The US Dollar will be influenced by four major economic data releases. The US Final GDP, Weekly Unemployment Claims, Pending Home Sales and Consumer Sentiment Index. If these read higher than expectations with the weekly unemployment claims dropping, the US Dollar is likely to witness further support. However, investors should note the main release will be tomorrow’s Core PCE Price Index. Traders are expecting no major news for Europe and volatility levels may fall tomorrow as European markets are closed for Easter.

European data on the other hand is stable and consumer confidence indexes are actually improving. This is largely due to the expectations of upcoming imminent rate cuts. However, the main factor is that the region is not seeing any real growth and inflation is down to a more acceptable level. No significant data is expected for the European market until next Tuesday. On April 2nd, Germany will confirm their latest CPI (inflation) data. If inflation continues to fall, a rate cut become more likely and the Euro can further decline.

Technical analysis currently points towards a continued downward trend. The price is trading below the neutral on the RSI and below the 75-Bar EMA. However, investors should note this will also be dependent on upcoming US data.

GBPAUD – BoE Members Don’t Vote For Hike For the First Time Since 2021!

Posted on March 21, 2024 by Michalis Efthymiou

The British Pound has been on a downward trend against the Australian Dollar for the second consecutive day, primarily driven by two factors. Firstly, the UK witnessed a notable decrease in inflation, with the rate dropping from 4.00% to 3.4%, surpassing previous forecasts and outpacing that of the US. Secondly, the Bank of England’s Monetary Policy Committee recorded no votes for a rate increase, marking the first instance since September 2021.

Despite the fact that only one of nine officials voted to cut interest rates by 25 basis points, no one supported raising them, while at the previous meeting there were two members, who were Jonathan Haskel and Catherine Mann. The Govornor of the Bank of England also gave encouraging comments on inflation, but are still less likely to cut rate before the Federal Reserve. According to economists, the Bank of England are likely to cut interest rates within the summer, most likely July or August depending on the resilience of the economy. Tomorrow the GBP will primarily be influenced by the UK’s Retail Sales data. If the UK Retail Sales is lower than -0.4%, the Pound is again likely to come under pressure from sellers in the short-medium term.

Meanwhile, the Australian Dollar has exhibited strong performance this week, reaching historic highs against several currencies. The hawkish stance of the Reserve Bank of Australia (RBA) and the latest employment figures have bolstered the Australian Dollar’s position. Australia recorded a significant increase in employment, with 116,500 more individuals employed within the economy compared to the previous month, surpassing analysts’ expectations and marking the highest surge since December 2021. Concurrently, the unemployment rate dropped from 4.00% to 3.7%, positioning Australia with a lower unemployment rate than the UK.

Consequently, fundamental analysis leans towards supporting a strengthening AUD. Correlations with Gold also lend support to the Australian Dollar and the AUDUSD pair, as a higher Gold price is believed to bolster the AUD to some extent. While technical analysis and indicators currently suggest a decline in the exchange rate, oscillators have yet to signal an oversold price. Nonetheless, investors are advised to exercise caution due to potential volatility.

XAUUSD Analysis – Eyes Turn to FOMC Meeting!

Posted on March 20, 2024 by Michalis Efthymiou

The upward momentum in gold prices diminished on March 12th, but there isn’t a clear shift in direction yet. Analysis of both the 2-hour and 4-hour charts reveals a descending triangle pattern emerging, while on longer timeframes, it appears to be a mere retracement. This suggests that the market is still abiding by the established price range observed last week, signaling a sideways movement according to technical analysis. However, tonight’s FOMC Statement and Powell’s Press Conference could alter this trajectory.

With consumer inflation consistently surpassing expectations for three consecutive months and the PPI doubling within 30 days, there’s now increased uncertainty surrounding monetary policy. Investors are eagerly awaiting clarification, anticipating potential volatility. If the Federal Reserve hints at delaying or reducing rate cuts, gold may lose its appeal, potentially breaking below the $2,147 support level.

Economists largely anticipate the Fed to proceed with its planned cut in June, albeit with less frequency thereafter, aiming to navigate a soft landing while addressing inflationary pressures. The current prediction by the CME FedWatch Tool suggests a rate cut in June 2024. Any decline in inflation, akin to what occurred today in the UK, could drive up demand for gold. With US interest rates expected to remain at 5.50%, market focus predominantly lies on forward guidance.

A serious concern for economists and bankers is the rise in the price of Oil. The American Petroleum Institute (API) reserves report published yesterday recorded a decrease of 1.519M barrels instead of the expected increase of 0.077M barrels. This applies further upward pressure, but investors are glad to see prices retracing.

The latest report from the US Commodities Futures Trading Commission (CFTC) indicates a continued rise in contracts, with buy contracts increasing by 25,734 and sellers decreasing by 2,766. This underscores the prevailing belief among many traders and institutions that gold prices will either rise or hold steady.

Although technical analysis presently indicates downward momentum and an intraday downward trend, Fibonacci levels suggest the price is finding support within the current range. Consequently, short-term traders may await a bearish breakout below $2,155.32 (61.8% Fibonacci level) for clearer signals, with momentum likely to pick up following the opening of the US trading session.

Tomorrow’s release of March data on business activity in the US and eurozone, particularly the anticipated slowdown in the US Services PMI from 52.3 points to 52.0 points and a potential decrease in Manufacturing PMI from 52.3 points to 51.8 points, is expected to introduce volatility in tomorrow’s trading sessions.

USDJPY – No Technical Recession For Japan, When Will the BoJ Hike?

Posted on March 11, 2024 by Michalis Efthymiou

The main development for the Japanese Yen is the possible hike with is pending. The Bank of Japan will be the only member of the G7 group which will be hiking interest rates in 2024. The remaining six are likely to cut interest rates in the summer months depending on inflation. However, investor should also take into consideration the indirect correlation between the Dollar and Yen. This is due to their status as safe haven currencies. Japan has the second highest currency reverses in the world and makes up almost 9% of traded currencies. The Bank of Japan have not hiked interest rates since 2007.

The Japanese Yen is not seeing major volatility within this morning’s Asian session and European session but is seeing some gains against the Dollar. The Yen is trading slightly higher than the day’s market price, but investors will monitor any change in momentum. Previously, the preliminary economic growth data indicated that the Japanese economy has slipped into a recession. However, the GDP rate read 0.1% which confirms “no recession”. Therefore, economists are continuing to predict the Bank of Japan will keep interest rate hikes as an option for the next two meetings.

Households are minimizing spending amid the economic crisis and rising inflation, which could negatively affect the national economy, which entered a recession at the end of last year. Despite this, the Bank of Japan is considering abandoning the current loose monetary policy after negotiations between the management of national companies and trade unions on adjusting employee wages, which increases the consumer price index against demand growth.

The market is implying a 53% chance the Bank of Japan will shift rates to zero at its meeting on March 19th. However, some analysts still believe it might be at April’s meeting. However, the currency is likely to grow for as long as the Japanese economy does not fall into a “technical recession” and other competitors continue with rate cuts.

Investors are pondering why the USDJPY isn’t experiencing a significant and distinct downward price movement. Fundamental analysts suggest that numerous investors are waiting for validation from the monthly inflation data to gauge when the Federal Reserve might “pivot.” Should the yearly inflation rate fail to decrease, the Fed could delay rate hikes. Consequently, the Dollar could persist obstinately. Conversely, a decline in inflation could lead to a rise in the Japanese Yen.

The latest employment figures for the US are as follows:

Average Salary Growth: 0.1% vs 0.2%

Unemployment Rate: 3.9% vs 3.7%

NFP Employment Change: 275,000 vs 195,000

The new employment data for the US originally brought about a decline in the US Dollar, before correcting upwards. The first reaction to sell the Dollar was largely due to data indicating a rate cut by June. The salary growth fell to a level which the regulator is more comfortable with, and the unemployment rate rose to 3.9%. Previously economists were advising the Unemployment Rate will need to reach 4-4.5% to bring inflation down. According to the FedWatch Tool, 58% of traders believe the Fed will cut in June and 25% believe it could be in May.

ECB Keep Interest Rates Unchanged and Confirms Inflation Predictions

Posted on March 7, 2024March 7, 2024 by Michalis Efthymiou

During this morning’s Asian and European sessions, the EURJPY is experiencing significant and unmistakable price movements. Conversely, the EURUSD has the lowest spread and swap fee, plus is likely to maintain volatility owing to upcoming economic releases which are related to the US employment sector. Currently, the EURUSD is retracing towards the previous day’s breakout level without breaking below it, suggesting a lack of definitive downward momentum favoring the Dollar. Though investors should note the price can swing and change once the ECB president speaks to journalists.

Moreover, assessments based on Moving Averages and Oscillators indicate that the exchange rate remains within the buy zone, encompassing indicators such as the 75-bar EMA, 100-bar EMA, and RSI. However, trading below the VWAP signals a selling opportunity for the day, despite the ongoing downward momentum. The trajectory of the trend will heavily rely on tomorrow’s US employment data.

Regarding the Euro, heightened volatility is anticipated when ECB President Lagarde holds a press conference and engages with journalists directly. The monetary policy statement forecasts inflation to surpass the target in 2024, primarily attributed to wage growth. Nonetheless, economists highlight that the inflation forecast remains subdued compared to other regions.

Short-term traders should consider not only the ECB president’s statements but also market sentiment, as they often diverge. Bloomberg analysts suggest the ECB will likely maintain lower rates over the next three years. However, investors should remain vigilant as price action could shift during Lagarde’s press conference.

For the US Dollar, the price will of course be determined by tomorrow’s NFP data and salary growth. It is also worth noting the yesterday publication of the US Federal Reserve’s “Beige Book” report. According to report, stable or growing business activity was recorded in 11 out of 12 financial districts, which makes officials’ caution justified, since the risks of accelerating inflation remain. In this regard, it is worth noting the comments of the President of the Federal Reserve Bank (FRB) of Minneapolis, Neel Kashkari, who said that strong economic growth could limit the number of adjustments to borrowing costs this year to two or even one.

GBPUSD Climbs For A 5th Consecutive Day, Eyes On ECB and NFP!

Posted on March 7, 2024 by Michalis Efthymiou

The US Dollar declines against all currencies as investors increase exposure in alternative safe haven assets.
Safe haven assets growing in demand this week include the Japanese Yen and Gold.
The Pound rises against the Dollar but declines against the Yen, Euro and Australian Dollar over the past 24-hours.
How will the Chancellor’s new Budget influence the UK economy and the Pound?

GBPUSD

The cable exchange rate continues to trade within a bullish trend which is forming higher highs and higher lows. However, questions remain over the performance of the Pound over the short-term. The Pound over the past two days has weakened against most currencies. Therefore, the bullish price movement is largely being driven by the Dollar. The US Dollar Index is trading lower for a third consecutive day and if the price falls below 103.19, the GBPUSD is also likely to continue forming higher impulse waves.

The US Dollar is not yet particularly pressured by economic data even though economic data is weakening. Yesterday’s JOLTS Job Openings were as expected as was the ADP NFP Employment Change. Last month’s NFP data added a further 353,000 more employed individuals and salaries rose by a whopping 0.6%. In addition to this, US inflation continues to remain stickier than the Federal Reserve would like. So, we can see here that there is not yet economic data signalling major weaknesses which have been the UK and EU.

Nonetheless, the price of the Yen and Gold are significantly rising in value indicating investors may look to ditch the USD in favor of alternative safe haven assets. However, this is a concern but not yet a fact or reality. If ECB are unable to persuade investors, they will not cut rates before the Federal Reserve, the US Dollar potentially may again rise against many currencies including the Pound. Also, if tomorrow’s employment data beat analysts’ expectations, the US Dollar again can witness gains. Investors will particularly be interested in seeing the Average Hourly Earnings and NFP Change.

In regard to the UK budget, investors mainly paid attention to certain reductions announced by the Chancellor of the Exchequer Mr Hunt. In particular, the draft budget provides for a reduction in contributions to the social insurance fund by 2%, as well as a temporary freeze of excise taxes on alcohol and fuel. There were no major surprises in the budget, but for the GBP and the UK this is a positive. Previous surprises and major fiscal changes in the UK budget have caused a significant collapse in the Pound at times.

Technical analysis indicates buyers are currently controlling the exchange rate. The price trades above the 75-bar EMA and above the Neutral on the RSI and Stochastic Oscillator.

Gold Aims For All-Time Highs As Buyers Outnumber Sell Contacts (CFTC)

Posted on March 4, 2024March 4, 2024 by Michalis Efthymiou

XAUUSD – Investors Shift Focus from Currencies as Rate Cuts Appear Most Probable!

At the start of the US trading session, the price of Gold swiftly climbs by 0.40%, reaching its highest level since December 4th. It now stands slightly above its previous lows in April 2023 and December 2023. An intriguing development for Gold “buyers” is the latest CFTC report, revealing a notable increase in buy positions compared to sell positions.

Trading participants highlighted the decline in consumer sentiment during February, raising concerns about the potential initiation of a borrowing cost reduction program by the US Federal Reserve soon. The University of Michigan’s Consumer Confidence Index fell from 79.6 to 76.9 points, in line with neutral forecasts. Additionally, the Institute for Supply Management’s (ISM) Manufacturing PMI decreased from 49.1 to 47.8 points in February, below analysts’ expectations of 49.5 points.

When looking at Technical analysis, most indicators continue to signal the continuation of buy trades. however, investors are also concerned about purchasing the commodity at such high prices. The Commodity is trading as “overbought” on the RSI on all time-frames under the below the daily chart. However, most technical analysts are advising investors need to give greater importance to the price ranges from the past 12-months as investors are becoming more comfortable with the higher prices required to access the safe haven commodity. According to Fibonacci, a medium term bullish trend can see the price rise by a further 3.50%.

US30 – EU Imposes Fine on Apple, Adding Significant Intra-day Pressure!

During the Asian and European sessions earlier today, the US30 consistently drops in value, trading 0.50% lower before the US market opens. Despite a slight rebound during the US session, risks persist. Most components within the Dow Jones remain in negative territory. Moreover, the NASDAQ and SNP500 also register declines, maintaining certain short-term “sell” indications within the market.

Of the 30 stocks comprising the US30, only 7 are currently trading higher, with Apple experiencing the most pronounced decline, down by -2.20%. Investors are offloading shares following a hefty fine imposed by the EU, totaling $1.8 billion. This penalty stems from allegations that Apple hindered rival music streaming services like Spotify from informing iPhone users about cheaper subscription options outside Apple’s app store.

Another concern for investors is the 10-Year Bond Yields, currently at 0.043%, making it challenging for debt costs to decrease. Additionally, there’s a recognition that momentum from earnings season and data releases may diminish over time. Nevertheless, some positives persist, including the inclusion of Amazon stocks in place of Walgreen Boots, which are currently gaining value by 0.40%. Furthermore, most earnings data from the latest QERs have been generally positive.

Key focus this week will be on employment sector data, particularly JOLTS Job Openings and NFP Change figures. If the data remains robust, it could bolster investor sentiment in the stock market.

Regarding technical analysis, the price is trading around 49.20, near the 75-Bar Exponential Moving Average, suggesting a neutral stance. However, a breach of the day’s low at $38,884.30 could trigger sell signals.