This week we have seen some highly important readings from the United States, that are not only important for traders and investors, but also for the Fed. The US CPI data was released a few days ago and confirmed that inflation data reached its peak last month when it delivered a reading of 9.1%. The fresh reading for the US CPI came in at 8.5%, and the decline in the number was primarily driven by one factor and one factor alone: the drop in oil prices. Now investors and traders believe that the Fed in the United States is not likely to increase the interest rate by 75 basis points. The expectations are that the next interest rate hike by the Fed will be 50 basis points. Several Fed members have also shown their perspective on the US interest rate policy on the back of this data, and their message is that the Fed is far from reaching its target.
The US and European futures are trading higher on the final trading day of this week. The Volatility Index has taken a serious beating this week, and is now trading near the 20 handle; and the chances are that the price may actually break below the $20 mark.
In terms of the forex market, the Dollar Index fell this week as traders now believe that the Fed is likely to hike interest rates more aggressively. One may keep in mind that the main factor which has been fuelling the rally for the Dollar Index has been the Fed’s hawkish monetary policy. Currency pairs like the EUR/USD have seen significant improvement in their price action this week. Once again, the improvement in the currency pair has not been because the economic data from the Eurozone was deemed impressive, but due to the Dollar Index experiencing notable weakness this week.
Brent and Crude Oil prices continue to trade below the $100 price mark as traders believe it is likely the price action may see more weakness in the coming days. This is primarily due to the softness in oil demand, along with some concerns that there may be too much supply out there. Yesterday, OPEC cut its forecast for global growth for next year, and this reduction in growth forecast is pushing the prices lower.
The sentiment certainly seems to be shifting when it comes to the crypto market. This week we have seen the biggest news for the crypto market; the 10 trillion asset management company, BlackRock, has picked Coinbase to offer their clients direct exposure to the Bitcoin price. The timing of this event is crucial because the Bitcoin price is still hovering near the lows of this year, and this grants the best opportunity to institutional investors to build their portfolios.
Ethereum’s price action has been very interesting this week. The price has almost doubled in the past few weeks, and that is purely down to enthusiasm ahead for the massive network upgrade. The blockchain company has performed its final test this week with tremendous success, and the network upgrade is likely to take place next month.
The Asian stock market traded mostly higher on the last trading day of the week. The Nikkei Index surged by 2.46%. The HSI index increased by 0.45%, while the KOSPI index increased by 0.11%. The Shanghai Index rose 0.12%.
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. 51% of the shares traded above their 200-day moving average.
Dow Jones Futures Today
The Dow Jones futures are trading higher today. In terms of economic data, investors will be looking at the US Prelim UoM Consumer sentiment data, which will be coming at 14:00 GMT. The forecast is 52.5, while the previous reading was 51.
The Dow Jones futures are trading higher today, and the index is in the process of challenging its 200-day SMA on the daily time frame. Yesterday, the index broke above the 200-day SMA, which confirmed another sign of strength. Later in the day, we did see some weakness coming back, which pushed the index below the 200-day SMA. However, bulls seem to be ready to push the prices higher once again, and if the US Consumer data comes in better than expectations, we could easily see the price breaking above the 200-day SMA.
As for the RSI, it indicates that prices are nearly overbought on the daily time frame. Currently, the RSI is trading at 68.
The near-term support is 33,343, while the resistance is 34,209.
Stock Market Rally
The S&P 500 stock index closed lower on Thursday; the index fell by 0.07%. The real estate 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 0.08%. Twenty-five shares advanced, while five shares closed lower.
The NASDAQ composite, the tech-heavy index, closed lower by 0.58% yesterday.