Wall St Ends Higher as US Inflation Cools, Extending Recent Gains.

Cooling US Inflation Spurs Wall Street’s Positive Momentum

The stock market in the United States continued its upward trajectory on Thursday, buoyed by the revelation of weakening U.S. producer inflation, which reached its lowest point in almost three years. The Nasdaq, in particular, surged more than 1% for the second consecutive day, affirming the sustained gains.

Inflationary Pressures Ease, Indicating a Possible End to Rate Hikes

Fresh data revealed a significant decline in annual growth for consumer prices in the United States, providing further evidence of abating inflationary pressures. The Consumer Price Index (CPI) report, released on Wednesday, demonstrated the weakest yearly expansion in over two years. These reports have prompted discussions that the Federal Reserve may halt its upward trajectory of raising interest rates, following a projected 25 basis point increase later this month.

Experts Remain Encouraged by Positive Trend

“PPI is again another confirmation this week that inflation is still trending in the correct direction, despite improved consumer and labor sector statistics overall. That is encouraging,” stated Mona Mahajan, senior financial strategist at Edward Jones.

The producer price index (PPI) for June exhibited a modest 0.1% increase over the past twelve months. However, this was notably weaker compared to the 0.9% surge observed in May, marking the lowest year-over-year improvement since August 2020.

Asia Session Recap: Japanese Industrial Production Data Disappoints

Japanese Industrial Production Slips, Yen Appreciates

During the Asia session, Japan’s revised industrial production data unveiled a 2.2% month-on-month decline, surpassing the anticipated decrease of 1.6%. Despite the Bank of Japan’s ultra-dovish monetary policy, aimed at stimulating economic growth, the Japanese yen has recently experienced a strong appreciation against major currencies. The USD/JPY touched a low of 137.25 today, reflecting the yen’s strength.

Europe & US Session Outlook: Dollar Index Struggles

Dollar Index Retraces After Hitting a Low

In the morning trading session, the dollar index (DXY) briefly reached a low of 99.60 before experiencing a slight rebound. The day’s notable economic event is the release of the University of Michigan’s preliminary consumer mood poll, which includes inflation forecasts. A persistently low reading in the poll would likely exert downward pressure on the dollar index (DXY).

The Kiwi Dollar (NZD) and Its Prospects

Celebrating Māori New Year in New Zealand

Today, New Zealand celebrates Māori New Year, known as “Matariki.” As a result, it is a national holiday, contributing to the rise of the Kiwi dollar. The currency has surpassed a significant resistance level of around 0.6400, a threshold last surpassed in January of this year.

Central Bank Outlook and Monetary Policy

The Monetary Policy Committee of New Zealand has decided to maintain the official cash rate (OCR) at 5.50%. By keeping interest rates at a restrictive level for the foreseeable future, the committee aims to bring inflation back within the target range of 1% to 3% while supporting sustainable employment. The next Monetary Policy Committee meeting is scheduled for August 16, 2023.

The Japanese Yen (JPY) and Its Current Performance

Yen Rises as US Dollar Weakens

As the value of the US dollar plummets, the Japanese yen gains ground against most major currencies. The USD/JPY exchange rate currently hovers around 137.70 after briefly touching 137.25 earlier today.

Bank of Japan’s Monetary Policy and Outlook

The Bank of Japan intends to continue its Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control to achieve its price stability target of 2%. The central bank has implemented several measures, including negative interest rates on policy-rate balances and the purchase of Japanese government bonds, to maintain 10-year JGB yields of around 0%. Although inflation is expected to temporarily decelerate, moderate acceleration is projected in the future, supported by improvements in the output gap and inflation expectations. Japan’s economy is anticipated to recover gradually. The next Bank of Japan meeting is scheduled for July 28, 2023.

The Swiss Franc (CHF) and the Latest Developments

Modest PPI Growth Expected for the Swiss Franc

The Producer Price Index (PPI) in May revealed a 0.3% year-on-year decline, reflecting ongoing manufacturing declines in the Eurozone. It is predicted that July will see a modest gain of only 0.2% year-on-year. The Swiss franc has attracted substantial inflows, resulting in USD/CHF dropping below 0.8600 overnight. The currency pair is expected to approach 0.8550 during the day.

SNB Monetary Policy and Economic Outlook

The Swiss National Bank (SNB) has further tightened its monetary policy by raising the SNB policy rate by 0.25 percentage points to 1.75%. According to the latest forecast, average annual inflation is projected to be 2.2% for 2023 and 2024, and 2.1% for 2025. The rate increase has prevented even higher estimates. The SNB expects modest growth for the rest of the year due to subdued foreign demand, loss of purchasing power resulting from inflation, and stricter financial conditions. The GDP is forecasted to grow approximately 1% this year. The next SNB meeting is scheduled for September 21, 2023.

Global Market Overview

Asian Stock Markets

The Nikkei experienced a slight decline of 0.09%, while the Shanghai Composite rose marginally by 0.04%. The Hang Seng index registered a 0.24% increase, and the ASX witnessed a notable rise of 0.78%.

European Equities

The DAX futures showed a decline of 0.18%, whereas the CAC 40 exhibited a modest increase of 0.34%. The FTSE rose slightly by 0.09%.

US Stock Market

The Dow Jones Industrial Average experienced a modest gain of 0.14%, while the S&P 500 rose by 0.85%. The Nasdaq 100 outperformed, surging 1.58%.

Commodities

Gold prices decreased by 0.17% to $1956.47, while silver witnessed a slight increase of 0.04%, reaching $24.79 per ounce. Brent Oil declined marginally by 0.16%, settling at $81.23 per barrel, and WTI Oil experienced a similar decrease of 0.16%, reaching $76.77 per barrel.

News and Data

The following news and data are worth noting:

• Fed Waller is scheduled to speak at 02:00 (USD).
• Industrial Production data for May in Japan indicates a 2.2% decline (JPY).
• The Producer Price Index (PPI) for June in Switzerland remains unchanged (CHF).
• Manufacturing Sales for May in Canada are forecasted to increase by 0.8% (CAD).
• The Michigan Consumer Sentiment for July is anticipated to be 65.5 (USD).

GBPUSD: Positive Momentum on the Chart

Overview

The GBP/USD chart is currently experiencing positive momentum, indicating potential upward movement. However, traders should be aware of the resistance and support levels that could influence price action.

First Support Level: 1.3094

At the initial support level of 1.3094, there is a strong possibility of buyers entering the market. This level acts as a pullback support, suggesting a potential bounce in price.

Second Support Level: 1.3001

Another support level, situated at 1.3001, provides additional buying opportunities for traders. It serves as a floor for pullbacks and may contribute to price stability.

First Resistance Level: 1.3143

The first resistance level at 1.3143 indicates a significant hurdle for price increases. Traders should anticipate selling pressure at this point, potentially causing a change in the market’s direction.

Second Resistance Level: 1.3276

A second resistance level, located at 1.3276, reinforces the likelihood of price reversal due to selling pressure. Traders should carefully monitor this level for potential market dynamics.

Trade Suggestion

Based on the analysis, a possible trade suggestion is to buy at 1.3122, set the take profit (TP) at 1.3142, and the stop loss (SL) at 1.3108. However, it’s essential to conduct thorough research and consult with a financial advisor before making any trading decisions.

EURUSD: Bullish Continuation Expected

Overview

The EURUSD financial instrument displays a bullish trend, suggesting the possibility of a continued upward movement. Traders should pay attention to key support and resistance levels to make informed decisions.

First Support Level: 1.1079

The initial support level at 1.1079 acts as strong pullback support, indicating a lower limit for the price. It presents a potential buying opportunity for traders.

Intermediate Support Level: 1.1192

At 1.1192, an intermediate support level serves as both an overlap support and a reinforcing price floor. Traders should consider this level as an area of increased price stability.

First Resistance Level: 1.1367

The first resistance level, situated at 1.1367, represents a substantial upper boundary. Determined by a 161.80% Fibonacci retracement, it suggests possible selling pressure and resistance to further price increases.

Second Resistance Level: 1.1366

Another notable resistance level at 1.1366 demonstrates its dependability as a top limit. Traders should be cautious of potential swing high resistance, which may affect market dynamics.

Trade Suggestion

Considering the analysis, a trade suggestion is to buy at 1.1235, set the take profit (TP) at 1.1273, and the stop loss (SL) at 1.1206. However, it is crucial to conduct thorough research and seek professional advice before engaging in any trading activities.

AUDUSD: Bullish Trend Continuation

Overview

The AUD/USD pair exhibits a bullish trend, indicating a favorable market environment for potential upward movement. Traders should be mindful of support and resistance levels to make well-informed trading decisions.

First Support Level: 0.6864

At 0.6864, the first support level acts as an overlap support, providing a high degree of price stability. Traders can expect increased buying activity at this level, potentially leading to a price rebound.

Second Support Level: 0.6848

An additional support level, situated at 0.6848, serves as another overlap support. It further strengthens the defense against potential price decreases, offering traders an area of support.

First Resistance Level: 0.6878

The first resistance level, positioned at 0.6878, acts as a formidable obstacle to price increases. Traders should exercise caution as the price approaches this overlap resistance.

Second Resistance Level: 0.6896

If the price successfully breaks through the first resistance level, it may attempt to reach the second resistance level at 0.6896. This level, supported by a 78.60% Fibonacci projection, carries a higher likelihood of impeding further price increases.

Trade Suggestion

Based on the analysis, a potential trade suggestion is to buy at 0.6878, set the take profit (TP) at 0.6895, and the stop loss (SL) at 0.6864. However, traders should conduct thorough research and seek professional advice before engaging in any trading activities.

USDJPY: Negative Momentum Signals

Overview

The USD/JPY chart is currently displaying a negative momentum, primarily due to the price breaking below an ascending support line. This break suggests the possibility of a bearish swing. However, traders should be aware of potential market dynamics and key support and resistance levels.

First Support Level: 138.16

The first support level at 138.16 holds significance as it aligns with both the 50% Fibonacci retracement level and an overlap support. This confluence implies a price level where purchasing activity may emerge, potentially leading to a rebound in price.

Intermediate Support Level: 138.03

At 138.03, an intermediate support level reinforces the potential for buyers to enter the market. This level coincides with a support overlap and the 61.80% Fibonacci retracement level, providing additional support to the market.

First Resistance Level: 138.449

The first resistance level, considered an overlap resistance, is located at 138.449. When the price approaches this level, it may experience selling pressure, potentially causing a reversal or change in direction.

Second Resistance Level: 138.720

A second resistance level, also an overlap resistance, is situated at 138.720. Traders should closely monitor this level as it may pose additional hurdles to further price increases.

Trade Suggestion

Based on the analysis, a possible trade suggestion is to sell at 138.14, set the take profit (TP) at 137.83, and the stop loss (SL) at 138.44. However, it is crucial to conduct thorough research and seek professional advice before engaging in any trading activities.

DOW JONES: Bullish Momentum

Overview

The DJ30 (Dow Jones Industrial Average) chart currently exhibits a bullish momentum, indicating a favorable market environment for potential upward movement. Traders should consider key support and resistance levels to make informed trading decisions.

First Support Level: 34290.02

The first support level at 34290.02 is considered strong as it functions as a pullback support. Additionally, it aligns with a 61.80% Fibonacci retracement and a 78.60% Fibonacci projection, indicating Fibonacci confluence and reinforcing its significance.

Second Support Level: 34036.35

At 34036.35, the second support level is designated as overlap support. Traders should pay attention to this level as it provides additional price support.

First Resistance Level: 34616.41

The first resistance level at 34616.41 holds significance as a multi-swing high resistance. Traders should anticipate potential selling pressure at this level, which may influence market dynamics.

Second Resistance Level: 34715.02

A second resistance level at 34715.02 carries importance due to its association with a 127.20% Fibonacci extension. Traders should closely monitor this level as it may impact price movements.

Trade Suggestion

Based on the analysis, a potential trade suggestion is to buy at 34419.48, set the take profit (TP) at 34483.65, and the stop loss (SL) at 34366.84. However, traders should conduct thorough research and seek professional advice before engaging in any trading activities.

BRENT CRUDE OIL: Weak Positive Momentum

Overview

The Brent Crude Oil chart currently displays a weak and confident positive momentum. Traders should be aware of potential price declines toward the first support level, followed by a potential rebound toward the first resistance level.

First Support Level: 80.70

The first support level at 80.70 is designated as overlap support, providing a high degree of price stability. Traders should monitor this level for potential buying interest that could contribute to a price rebound.

Second Support Level: 78.44

Situated lower at 78.44, the second support level lacks specific qualities to highlight its importance. Traders should consider this level as potential support but exercise caution in their analysis.

First Resistance Level: 82.87

On the upside, if the price reverses and begins to climb, it may encounter overlap resistance at the first resistance level of 82.87. This level could act as a significant barrier to further price increases.

Second Resistance Level: 85.13

The second resistance level at 85.13, an overlap resistance combined with a 78.60% Fibonacci retracement level, represents a potential target if the price surpasses the first resistance level. Traders should recognize this level as a potential barrier to price advancement.

Trade Suggestion

Considering the analysis, a possible trade suggestion is to buy at 80.94, set the take profit (TP) at 82.87, and the stop loss (SL) at 79.41. However, traders should conduct thorough research and seek professional advice before engaging in any trading activities.

GOLD: Neutral Momentum

Overview

The XAUUSD chart currently exhibits neutral momentum, indicating potential price oscillation between the first support and resistance levels. Traders should consider key levels to gauge potential price movements.

First Support Level: 1928.62

At 1928.62, the first support level acts as an overlap support. Traders should anticipate the concentration of buyers at this level, potentially leading to a price bounce if reached.

Second Support Level: 1891.51

The second support level at 1891.51 represents another potential area of purchasing interest. It serves as overlap support and may contribute to a price rebound.

First Resistance Level: 1956.78

At 1956.78, the first resistance level signifies a multi-swing high resistance. Historical selling pressure at this level indicates probable future resistance and potential obstacles to price increases.

Second Resistance Level: 1991.33

The second resistance level at 1991.33 serves as both an overlap resistance and a 50% Fibonacci retracement. This convergence of technical elements reinforces its potential as a barrier to further price increases.

Trade Suggestion

Based on the analysis, a potential trade suggestion is to buy at 1955.50, set the take profit (TP) at 1991.33, and the stop loss (SL) at 1929.90. However, traders should conduct thorough research and seek professional advice before engaging in any trading activities.

BITCOIN: Positive Momentum Continues

Overview

The BTC/USD instrument is currently experiencing positive momentum, suggesting a favorable market environment for potential price increases. Traders should carefully consider the support and resistance levels for informed decision-making.

First Support Level: 31,309

At the first support level of 31,309, there is a significant level of price support. This level also aligns with the 23.60% Fibonacci retracement, making it a notable area for potential buying interest.

Second Support Level: 30,561

The second support level at 30,561 serves as an additional area of support. It is considered to overlap support, indicating its potential importance in providing stability to the price.

First Resistance Level: 31,829

The first resistance level, situated at 31,829, carries significance as a swing-high resistance. Traders should be cautious of potential selling pressure at this level, as it could impede further price increases.

Second Resistance Level: 31,754

A second intermediate resistance level at 31,754 further reinforces the potential resistance to upward price movement. Traders should closely monitor this level for any potential market dynamics.

Trade Suggestion

Based on the analysis, a possible trade suggestion is to buy at 31,177, set the take profit (TP) at 31,455, and the stop loss (SL) at 30,946. However, it is essential for traders to conduct thorough research and seek professional advice before making any trading decisions.

Conclusion

In conclusion, the recent market updates indicate a cooling of inflationary pressures in the United States, leading to positive momentum in Wall Street. The Federal Reserve’s potential halt in rate hikes has gained attention. In Asia, Japanese industrial production data disappointed, but the Japanese yen has strengthened. The Swiss franc has been affected by manufacturing declines and the SNB’s tightening monetary policy. Global stock markets have displayed mixed performance, and commodity prices have seen slight fluctuations. As these market dynamics unfold, investors and analysts continue to monitor economic indicators and central bank policies to gauge future market movements.

FAQ’S

1. Q: How has the recent data affected the outlook for inflation in the United States?
   • A: The recent data, including the weakening U.S. producer inflation and the Consumer Price Index report, indicate a slowdown in inflationary pressures. This has led to discussions about the possibility of the Federal Reserve halting its rate hikes.
2. Q: What is the current stance of the Bank of Japan regarding its monetary policy?
   • A: The Bank of Japan continues to implement its Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control to achieve its price stability target of 2%. The central bank plans to maintain negative interest rates and purchase Japanese government bonds to keep 10-year JGB yields around 0%.
3. Q: How has the Swiss franc performed in recent times and what are the factors influencing its value?
   • A: The Swiss franc has experienced appreciation due to significant inflows. Manufacturing declines in the Eurozone have also impacted its performance. The Swiss National Bank (SNB) has tightened its monetary policy and raised the SNB policy rate to 1.75% to address inflation concerns.