Fundamental Analysis Report With Charting Trends – 13 July 2023
13 Jul 2023
Investor Sentiment Soars as Nasdaq Records Over 1% Gain on Inflationary Pressures Easing.
In a positive turn of events, the Nasdaq led Wall Street to a higher close as a recent Consumer Price Index (CPI) report indicated a decline in inflation, providing a boost to investor sentiment. This article provides an overview of the market update, highlights key statistics, and discusses the implications for different trading sessions.
Nasdaq’s Rise and CPI Report
Consumer Prices Show Smallest Annual Increase
A recent study has revealed that consumer prices experienced their smallest annual increase in over two years, signaling a decline in inflationary pressures. This news instilled confidence among investors, leading to a surge in U.S. stocks on Wednesday.
Nasdaq Takes the Lead
The Nasdaq emerged as the frontrunner, registering a gain of over 1% during the trading session. This rise in Nasdaq was primarily driven by shares of large tech-related businesses, which are known to be sensitive to changes in interest rates. The Technology sector saw a notable increase of 1.3%.
Impact on Interest Rates
The statistics confirmed the predictions that the Federal Reserve might decide to leave interest rates unchanged. Earlier expectations suggested a 25 basis point increase at the upcoming decision meeting in July.
Market Analysis and Expert Opinion
Bullish Market Sentiment
By late afternoon, the market indexes started to retreat from their early highs. However, experts state that the bulls remain firmly in charge. Michael James, the managing director of equities trading at Wedbush Securities, remarked, “The CPI data we got was clearly what the bulls wanted to see, and those who have been waiting for a pullback continue to get frustrated.”
What Happened in the Asia Session?
Trading in the Asia session remained relatively quiet as the dollar index (DXY) experienced a significant overnight decline. Market participants were absorbing the latest U.S. CPI data for the month of June. Since no significant news stories emerged during the morning, trade activity is expected to pick up during the European session.
What Does It Mean for the Europe & US Session?
Until the U.S. market opens, there are no other major news stories anticipated, except for the UK GDP data and Eurozone industrial production numbers. As the day progresses, trading activity is expected to gradually increase with the release of U.S. Producer Price Index (PPI) and unemployment claims data.
The Dollar Index (DXY) Outlook
Key News Events Today
- Unemployment Claims
- FOMC Member Waller Speaks
Wholesale Inflation Trends
Since the beginning of the year, the PPI, which measures wholesale inflation in the U.S., has been on a significant decline. Both the headline and core readings indicate deflationary trends in this sector. The most recent data are likely to confirm these patterns. Consequently, if the PPI statistics come in weaker than expected and unemployment claims continue to trend upward, the U.S. dollar may face severe selling pressure.
Impact of Waller’s Speech
FOMC member Christopher Waller will be delivering a speech on the economic outlook at the Money Marketer’s event in New York. If Waller maintains a hawkish tone, similar to other members of the Committee, his comments could potentially bolster the U.S. dollar.
Central Bank Notes
- The federal funds rate target range will be 5 to 5-1/4 percent.
- The Committee is strongly committed to returning inflation to its 2% target.
- Monetary policy adjustments will be made if risks emerge that could hinder goal achievement.
- Various factors will be considered, including labor market conditions, inflation pressures, expectations, and international and financial developments.
- The next meeting is scheduled for July 26, 2023.
The Euro (EUR) Outlook
Key News Events Today
- Industrial Production
Euro Strength on Weaker U.S. CPI
Following the release of weaker U.S. CPI data, the euro surpassed the 1.1100 mark, indicating a positive trend. As incoming PPI readings and unemployment claims are anticipated, the euro’s gains might further extend.
Central Bank Notes
- The ECB has raised the three key interest rates by 25 basis points.
- Slight adjustments have been made to economic growth projections.
- The Governing Council will maintain sufficiently restrictive interest rates to achieve the inflation target.
- Rate decisions will be data-dependent, considering inflation outlook, economic data, and monetary policy transmission strength.
- The next meeting is scheduled for July 27, 2023.
Gold (XAU) Outlook
Key News Events Today
- Unemployment Claims
- FOMC Member Waller Speaks
Impact of Inflation and Unemployment Claims
Similar to the Dollar Index, gold prices are influenced by PPI trends and unemployment claims. The decline in wholesale inflation, combined with increasing unemployment claims, may prompt intense gold buying if the figures turn out worse than expected. Spot prices have already reached $1,960/oz and are showing signs of further increase.
Waller’s Speech and Gold Market
FOMC member Christopher Waller’s speech at the Money Marketer’s event in New York may have some impact on the gold market. However, the effect could be muted if Waller’s statements align with the hawkish attitude of his colleagues.
Global Markets Overview
Asian Stock Markets
- Nikkei: Down 1.49%
- Shanghai Composite: Down 1.22%
- Hang Seng: Up 2.49%
- ASX: Up 1.56%
- DAX Futures: Up 1.47%
- CAC 40: Up 1.57%
- FTSE: Up 1.83%
U.S. Stock Market
- Dow Jones: Up 0.25%
- S&P 500: Up 0.74%
- Nasdaq 100: Up 1.15%
- Gold: $1,962.88 (+0.33%)
- Silver: $24.24 (+0.64%)
- Brent Oil: $80.39 (+0.35%)
- WTI Oil: $75.97 (+0.29%)
News & Data
- (GBP) GDP (MoM) (May): Actual –0.1%, Forecast –0.3%, Previous 0.2% at 11:30
- (GBP) Monthly GDP 3M/3M Change (May): Actual 0.0%, Forecast –0.1%, Previous 0.1% at 11:30
- (GBP) Manufacturing Production (MoM) (May): Actual –0.2%, Forecast –0.5%, Previous –0.3% at 11:30
- (EUR) Industrial Production (MoM) (May): Forecast 0.3%, Previous 1.0% at 14:30
- (USD) Initial Jobless Claims: Forecast 250K, Previous 248K at 18:00
- (USD) PPI (MoM) (Jun): Forecast 0.2%, Previous –0.3% at 18:00
GBP/USD: Bullish Momentum Signals Potential Rise
The GBP/USD pair is currently displaying signs of bullish momentum, indicating a possible upward movement. However, there is a possibility of a bearish reaction near the first resistance level, which could result in a decline toward the first support level.
First Support Level: 1.3003
The first support level at 1.3003 serves as pullback support and offers potential price stability. Traders should watch this level closely as it may act as a support and prevent further decline.
Second Support Level: 1.2938
Situated at 1.2938, the second support level is an overlap support that could potentially avert a deeper decline. Traders should monitor this level as it holds importance in supporting the price.
First Resistance Level: 1.3061
On the upside, if the price rises, it may encounter resistance at the first level, which is at 1.3061. This pullback resistance level is reinforced by a Fibonacci confluence, combining a 78.60% Fibonacci projection and a 161.80% Fibonacci extension.
Second Resistance Level: 1.3146
The second resistance level at 1.3146 is considered a swing-high resistance. If the market surpasses this level, it might pose a significant barrier to further price gains.
- Entry: Buy at 1.3061
- Take Profit: 1.3146
- Stop Loss: 1.2993
EUR/USD: Positive Trajectory Points to Potential Rise
The EUR/USD pair is currently exhibiting a positive trajectory, suggesting a continuation of the bullish trend toward the first resistance level.
First Support Level: 1.1139
The first support level at 1.1139 acts as a pullback support and is expected to provide price stability. Traders should pay attention to this level as it offers potential support during pullbacks.
Second Support Level: 1.1108
Located at 1.1108, the second support level functions as an overlap support, offering an additional safety cushion in case of further decline.
First Resistance Level: 1.1161
The first resistance level at 1.1161 is considered a swing-high resistance. It coincides with a Fibonacci confluence, as it aligns with a 100% Fibonacci projection and a 127.20% Fibonacci extension, further strengthening its significance.
- Entry: Buy at 1.1160
- Take Profit: 1.1187
- Stop Loss: 1.1141
AUD/USD: Bullish Trend Points to Potential Rise
The AUD/USD pair is currently experiencing a bullish trend, indicating a potential continuation in the upward direction toward the second resistance level.
First Support Level: 0.6805
The first support level at 0.6805 overlaps with overlap support, providing substantial stability to the price. Additionally, a 50% Fibonacci retracement level and another overlap support at 0.6772 further reinforce this level as a protective barrier.
Second Support Level: 0.6772
Located at 0.6772, the second support level overlaps with the first support level, adding to its significance. This level may act as a safety cushion during a downward movement.
First Resistance Level: 0.6845
Upon surpassing the overlap obstacle at the first resistance level of 0.6845, the price may continue its bullish ascent. This resistance level is strengthened by a Fibonacci retracement level of 78.6%, highlighting its importance.
Second Resistance Level: 0.6882
The second resistance level at 0.6882 is categorized as an overlap resistance and may act as a substantial roadblock to further price gains.
- Entry: Buy at 0.6839
- Take Profit: 0.6889
- Stop Loss: 0.6806
USD/JPY: Bearish Momentum Suggests Potential Decline
The USD/JPY pair is currently displaying a negative trend, with a break below an ascending support line indicating a likely bearish continuation toward the first support level.
First Support Level: 137.72
The first support level at 137.72, overlap support, coincides with a 50% Fibonacci retracement, providing significant price stability. Traders should closely monitor this level as it is expected to act as a support against further decline.
Second Support Level: 135.11
Located at 135.11, the second support level overlaps with the first one and aligns with a 61.80% Fibonacci retracement, further adding to its significance.
First Resistance Level: 138.72
On the upside, the first resistance level at 138.72 functions as a pullback resistance and may present a substantial obstacle to price gains if a retracement occurs.
Second Resistance Level: 140.92
The second resistance level at 140.92 is categorized as an overlap resistance and could potentially act as a barrier to additional price ascents.
- Entry: Sell at 138.335
- Take Profit: 137.74
- Stop Loss: 138.82
S&P 500: Positive Momentum Indicates Potential Rise
The US500 (S&P 500) chart currently exhibits positive momentum, suggesting a potential continuation of the upward movement toward the first resistance level.
First Support Level: 4456.0
The first support level around 4456.0 is crucial as it serves as a pullback support. Additionally, at 4379.3, the second support level is considered a strong support level. This level aligns with the 61.80% Fibonacci retracement level and serves as an overlap support.
First Resistance Level: 4510.6
Moving to the resistance levels, the first one can be found at 4510.6. As a swing-high resistance level, it holds significance due to a Fibonacci confluence occurring with a 161.80% Fibonacci extension and a 100% Fibonacci projection.
- Entry: Buy at 4474.60
- Take Profit: 4515.01
- Stop Loss: 4442.76
WTI Crude Oil: Bullish Momentum Signals Potential Rise
The current bullish momentum in the WTI/USD chart suggests a potential continuation of the upward trend toward the first resistance level.
First Support Level: 73.02
The first support level at 73.02 is an overlap support that provides significant price stability. Another overlap support at 70.22, coinciding with a 38.20% Fibonacci retracement level, offers additional support against a negative market trend.
First Resistance Level: 75.82
The first resistance level for bullish traders is located around 75.82. This overlap resistance level may impede upward price movement as it aligns with a 61.80% Fibonacci retracement and a 161.80% Fibonacci projection (Fibonacci confluence).
Second Resistance Level: 79.01
Should the price surpass the first resistance level, the second resistance level at 79.01, also an overlap resistance, may pose another obstacle to further price increases.
- Entry: Buy at 75.92
- Take Profit: 78.53
- Stop Loss: 73.70
Silver: Bullish Trend Points to Potential Rise
A recent break above a falling resistance line indicates a potential bullish continuation for the silver pair.
First Support Level: 23.28
In case of a price decline, the first support level at 23.28, overlap support, is likely to provide substantial stability. A second support level at 22.52, also overlap support, might offer an additional safety cushion.
First Resistance Level: 24.22
On the upside, the price may continue its upward movement toward the first resistance level at 24.22. This overlap resistance level is reinforced by a 78.60% Fibonacci retracement, making it a significant barrier.
Second Resistance Level: 24.98
The second resistance level at 24.98 is another overlap resistance and could potentially act as a major roadblock to further price increases.
- Entry: Buy at 24.25
- Take Profit: 25.21
- Stop Loss: 23.37
Ethereum: Bearish Trend Indicates Potential Decline
The price of Ethereum (ETH/USD) is currently trading below a bearish Ichimoku cloud, contributing to the current downward trend.
First Support Level: 1850.04
As the bearish trend develops, the price may continue its decline toward the first support level at 1850.04. This multi-swing low support level is expected to provide strong price support.
Second Support Level: 1795.91
Located at 1795.91, the second support level overlaps with support from various swing lows and serves as a strong support level. Additionally, it coincides with a 61.80% Fibonacci retracement, further emphasizing its significance.
First Resistance Level: 1901.91
The first resistance level at 1901.91 is important as it overlaps with resistance and aligns with a 61.80% Fibonacci retracement. This level might act as a barrier to upward price movement.
Second Resistance Level: 1971.82
The second resistance level at 1971.82 is categorized as a swing-high resistance and could potentially impede any upward price moves.
Additionally, at 1846.13, there is a persistent intermediate support level, which should also be considered.
- Entry: Sell at 1852.29
- Take Profit: 1793.66
- Stop Loss: 1910.93
In conclusion, the market update reveals a positive sentiment driven by the decline in inflationary pressures, as indicated by the recent CPI report. The Nasdaq outperformed other indices, while the U.S. dollar, euro, and gold face varying outlooks based on upcoming economic data and central bank speeches. Market participants are advised to closely monitor these factors and remain informed of any significant developments that may impact trading decisions.