Welcome to the Weekly Market Update!
In this edition, we bring you the latest highlights and insights from the world of finance. We will cover the week’s top stories, provide market analysis, highlight economic developments, discuss upcoming events to watch, and present technical analysis. Let’s delve into the key information you need to stay informed and make informed financial decisions.
Top Stories of the Week
- Oil Reaches a Two-Month High: A weaker USD, near-record China oil imports in June, and expectations of the Federal Reserve winding down its tightening cycle contributed to the rise in oil prices.
- USD Hits a 15-Month Low: Market sentiment suggests that a July rate hike will mark the final step in the Federal Reserve’s tightening cycle. Consequently, the USD experienced a significant decline, with USD/JPY falling by 2.6% during the week.
- US Banks Kick Off Q2 Earnings Season: With low expectations set for this earnings season, disappointing results could potentially dampen the ongoing rally in the S&P 500.
- Amazon’s Prime Day Launch: The two-day event showcased robust performance, with US online spending reaching $6.4 billion on the first day alone, making it the biggest e-commerce day of the year.
- Apple Establishes WeChat Online Store: Apple launched an official online store on Tencent’s WeChat platform in China. This new store conveniently lets users purchase the entire range of Apple products.
Market Analysis
- Inflation Cools as Fed’s Tightening Cycle Faces Doubts: US inflation dropped to a more than 2-year low of 3% YoY in June, significantly down from the 9% seen a year ago, a 40-year high. Both headline and core CPI cooled more than expected, suggesting the Fed’s success in combating inflation. While a 25 bps rate hike is expected this month, there’s growing speculation that it could mark the end of the Fed’s tightening cycle, with officials questioning the need for further increases.
Economic Highlights
- US inflation showed signs of cooling as the US Consumer Price Index (CPI) eased to 3% YoY in May, down from 4% in April. Core inflation also saw a decline, easing to 4.8% and falling below the forecasted 5%. Simultaneously, the US dollar experienced a significant drop, reaching a 15-month low, driven by market perceptions that the anticipated July rate hike could mark the final step in the Federal Reserve’s tightening cycle. This sentiment was reflected in the 2.6% weekly decline of USD/JPY exchange rate. These developments indicate shifting dynamics in the US economy with implications for inflation and monetary policy.
Upcoming Events to Watch
- UK CPI Announcement: Keep an eye on July 19th data, influencing rate decisions in the UK.
- US Retail Sales Update: Anticipate a 0.5% growth in June’s retail sales.
- Netflix Q2 Earnings Report: July 19th release, expected to show increased revenue and strong performance.
- Tesla Q1 Earnings Update: July 19th announcement highlighting record deliveries and substantial growth.
- US Bank Q2 Earnings: Focus on reports from Goldman Sachs, Bank of America, and Morgan Stanley as economic uncertainty impacts the banking sector.
Technical Analysis
We have analyzed the most popular trading pairs and assets, including EUR/USD, GBP/USD, Gold, and US500. Our aim is to provide you with an insightful analysis of their trends and support/resistance levels, which will help you make informed decisions.
EUR/USD
Last week, the EUR/USD pair experienced significant movement triggered by CPI and PPI data. As we enter a new week, it is worth noting that we are now in the territory of the New Week Opening Gap. The pair’s recent price action and the gap add further context to its current dynamics. The upward trend, higher peaks and troughs, and trading above the 50-day SMA remain key factors to watch in assessing the pair’s future movements.
GBP/USD
GBP/USD continues its upward trend, surpassing the 50-day Simple Moving Average (SMA). The price confidently broke above the significant 1.30 level and is now targeting the resistance levels at 1.32 and 1.335. On the downside, the previously breached resistance at 1.288 now acts as a substantial support level. The US dollar is under pressure due to declining inflation and growing expectations of the Federal Reserve’s easing of rate hikes, potentially starting in the early months of next year.
XAU/USD
XAU/USD is currently in an upward trend, forming higher highs and lows while trading above the 50-day Simple Moving Average (SMA). After a rally, the gold price successfully retested the 50 SMA. The Relative Strength Index (RSI) remained above the oversold territory during the correction since May, indicating the potential beginning of a new uptrend. Analysts suggest that for investors to regain confidence in the gold market, they would require a clear signal from the Federal Reserve confirming the end of interest rate hikes.
XUS500
XUS500 is on an upward trend, creating higher highs and lows above the 50-day Simple Moving Average (SMA). Despite the bearish divergence pattern signaled by the RSI, price action remained dominant and surged to new highs beyond the significant 4500-level. The previous consolidation resistance at 4450 now acts as a support level, followed by 4380, while the next potential target for upward movement is likely around 4600. However, we should anticipate choppy times ahead as market conditions remain uncertain.
Thank you for reading! Wishing you successful trades ahead!
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