US and European futures are indicating a lower open as investors continue to assess the odds of the potential recession taking place in the US and in Europe. This is the key reason that we have seen the US and European markets closing lower for the past three consecutive days. In addition, traders and investors are also concerned about China’s zero covid policy, and the recent changes in their stance have made some investors more optimistic. There are some indications that China is likely to bring life back to its normal level as Beijing has decided to ease off some of the covid related measures.
In terms of economic data, there isn’t any important event that is due today. However, we do have the President of the European Central Bank, Christine Lagarde speaking later today. Her tone about the monetary policy is likely to shape the price action in the Eurozone and it is likely to bring higher volatility for the Euro. If you look at the EUR/USD pair, there is no doubt that the Euro has experienced a remarkable recovery as the price of the EUR/USD has pulled itself out of its misery, and now it is trading well above the parity level. Having said that, it is important to note here that a lot of that is mainly due to the weakness in the dollar index, as traders are expecting the Fed to slow down the process of hiking the rate. The ECB is also expected to reduce the rate of interest rates. Traders will be assessing the hawkishness or dovishness in her tone today.
In addition to this, we do have the US Initial Jobless Claims data due today, The number will be released at 01:30 GMT and the forecast is for 230K while the previous reading was at 225K.
But none of these economic numbers are the real deal for the markets, as mentioned before. The economic data and the economic event that matters the most are slated for the next week and it is the US CPI inflation data that will determine the future path of US equity. In addition, the Fed will also announce its monetary policy next week and the US CPI reading is highly likely to influence their decision.
Over in Asia, we also saw a mixed session. At the time of writing this research note, the Japanese Nikkei index slipped nearly half a percent; the Topix index declined by 0.42%. South Korean index also experienced more losses and declined by 0.56%. As for Australia, the ASX 200 index fell by 0.58%. So the overall price action was negative. The rating agency Fitch announced its forecast of the Aussie housing market and said that it expected a significant drop in house prices which eroded the value of houses by nearly 10%. The reality is this prediction in house prices is highly likely to take place everywhere in the world as higher interest rates have slowed the process of customers buying homes.
In the commodity space, oil prices did see some recovery in their prices yesterday, but the overall price action still continues to remain weak. Today, we do see some green price action for both crude and brent oil prices as prices are oversold due to the intense sell-off for the past few days. However, the price action still doesn’t show a strong bullish bias among traders. This makes the current change in the direction of oil prices vulnerable and it is likely that the bulls may lose their battle against bears very soon. The main support zone for the Crude oil prices remains at 70 and the price range is likely to be between the $65 to $75 price mark.
As for gold prices, the price action shows that the bulls are controlling the momentum as the price is trading above the 200-day SMA on the daily time frame. As long as the price continues to trade above this price level, there are hopes for further higher highs for the price.