The Fed has confirmed this week that they are not going to slow down the process of increasing the interest rate, although traders believe that the Fed will remain data-dependent. The economic numbers released this week have been dire, and they have confirmed that the U.S. economy is slowing down and economic activity is facing weakness.
The U.S. and European futures are trading lower on the week’s final trading day. The volatility index has taken some more beating this week, and now it is trading below the 20 handle. This makes the VIX index cheap, and we may see some traders hedging by investing in volatility.
Forex
The dollar index gained strength this week in the forex market. The GBP/USD pair has fallen below its 50-day SMA on the daily time frame, which confirms further weakness. The economic numbers of the U.K. demonstrated that the cost-of-living crisis has become an issue for the BOE, which they seem to have no solution to as inflation continues to soar.
Gold
On Friday, gold prices reached a three-week low and are heading for their first weekly decline in five, mainly due to the stronger dollar and the prospects of more rate hikes in the United States.
The Federal Reserve dented the appeal of the shinning metal. Fed policymakers stated in their July meeting minutes, which were made public on Wednesday, that the pace of future rate hikes would rely on the incoming economic data and evaluations of how the economy was reacting to the higher rates that have already been approved. According to data released on Thursday, the number of people in the United States who submitted new claims for unemployment benefits dropped the previous week. In simple terms, the Fed isn’t ready to ease off from increasing the interest rate, adversely influencing the price of gold.
On the gold inflow and outflow side, the holdings of SPDR Gold Trust, the largest gold-backed exchange-traded fund in the world, saw a decrease of 0.32%, bringing the total to 985.83 tonnes.
OIL
Brent and Crude oil prices continue to trade below the $100 price mark as traders believe that it is likely that the price action may see more weakness in the coming days. The prices are off from the week’s lows, primarily due to a more significant than expected crude oil inventory data drawdown. However, most traders are concerned about extra supply coming from OPEC and the possibility of Iranian oil hitting the market. The good news is that U.S. oil refineries intend to keep operating at or near full throttle this quarter. To meet the demand for more fuel, refiners are putting their concerns regarding the economic downturn and falling retail prices to the side.
Cryptos
The sentiment certainly seems to be shifting regarding the crypto market. This week we have seen bitcoin prices moving in one direction and one direction only, which is to the downside. The price range has been immensely narrow, and there is no doubt that capitulation is coming for bitcoin. If we look at the current trend, the odds are strong that the next move is likely to be the downside and that the price could drop all the way to the 15k price level. However, if bulls take control of the price action and break out to the upside, the bitcoin price could easily reach 32K.
In terms of fundamentals, it was the FOMC Minutes which have influenced the price action the most. Traders now know that the Fed will not be easing off from increasing the interest rates and the odds are high that the next interest rate hike could be 75 basis points. From the institutional point of view, the Black Rock news is still the most positive and presents a lot of hope for bitcoin bulls.
Ethereum is on fire as the price has increased more than 100% from its lows of 880 formed on June 19. There is a lot of optimism among traders and investors ahead of Ether’s merge. The merger is expected to take place on Sept 15, and it is highly possible that the price may fall after the merger as the good news will be fully priced in by then.
Asian Markets
The Asian stock market mainly traded mixed on the week’s last trading day. The Nikkei index declined by 0.09%. The shanghai index increased by 0.28%, while the KOPSI index decreased by 0.51%. The Shanghai index fell by 0.27%.
Dow Jones and S&P 500: Market Breadth
The Dow Jones’ market breadth gained further momentum. 54% of the Dow Jones stocks are trading above their 200-day moving average.
The S&P 500 stock breadth also confirmed some more strength in its momentum. 53% of the shares traded above their 200-day moving average.
Dow Jones Futures Today
The Dow Jones futures are trading lower today. In terms of economic data, investors will be looking at the Canadian Retail Sales, which will be coming at 12:30 GMT. The forecast is 0.4%, while the previous reading was 2.2%.
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The Dow Jones futures are trading lower today, and the index has broken above the 200-day SMA, and the 50-day SMA is about to break above the 100-day SMA on the daily time frame, which is a strong bullish signal for the price action. The current retracement in the price may find its support near its 200-day SMA, which could be an opportunity to bag some bargains as the current price action has a lot of momentum behind it.
The near-term support is 33,396, while the resistance is 35,265.
Stock Market Rally
The S&P 500 stock index closed higher on Thursday, increasing by 0.23%. The energy sector led the index lower; four sectors out of 11 closed higher yesterday.
The Dow index increased on the second last trading day of the week; the Dow stocks moved the index higher by 0.06%. Twenty-six shares advanced, while 14 shares closed lower.
The tech-heavy index’s NASDAQ composite closed higher by 0.21% yesterday.