#EconomicComment
Falling US inflation sparks more risk appetite
The US consumer price index fell 0.1% instead of the expected 0.1% increase, slowing annual inflation to 3.0% from 3.3% last month and below the expected 3.1%. The price index excluding food and energy slowed to 3.3%, also weaker than expected.
The faster inflation slowdown prompted a reassessment of policy rate forecasts. According to the FedWatch tool, traders now see a 45% chance of three or more rate cuts by the end of the year, up from 27% a day ago and 14.5% a month ago.
This is negative news for the dollar and positive for global demand for risk assets, including equities and gold. US indices continue to hit all-time highs on a daily basis, and the sentiment index has returned to "greed" territory. The price of gold passed $2410 per ounce.
The price was above this level only between the 17th and 22nd and for a few minutes on the 12th and 19th.
Falling US inflation sparks more risk appetite
The US consumer price index fell 0.1% instead of the expected 0.1% increase, slowing annual inflation to 3.0% from 3.3% last month and below the expected 3.1%. The price index excluding food and energy slowed to 3.3%, also weaker than expected.
The faster inflation slowdown prompted a reassessment of policy rate forecasts. According to the FedWatch tool, traders now see a 45% chance of three or more rate cuts by the end of the year, up from 27% a day ago and 14.5% a month ago.
This is negative news for the dollar and positive for global demand for risk assets, including equities and gold. US indices continue to hit all-time highs on a daily basis, and the sentiment index has returned to "greed" territory. The price of gold passed $2410 per ounce.
The price was above this level only between the 17th and 22nd and for a few minutes on the 12th and 19th.
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#WaveAnalysis
#USDCAD reversed from key support level 1.3600;
Likely to rise to resistance level 1.3700.
USDCAD currency pair recently reversed up from the key support level 1.3600, which has been steadily reversing the price from the start of May.
The support level 1.3600 was strengthened by the lower daily Bollinger Band and by the 50% Fibonacci correction level of the previous upward impulse from January.
Given the predominant daily uptrend, oversold daily Stochastic and the rising bullish USD sentiment, USDCAD currency pair can be expected to rise further to the next resistance level 1.3700.
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#USDCAD reversed from key support level 1.3600;
Likely to rise to resistance level 1.3700.
USDCAD currency pair recently reversed up from the key support level 1.3600, which has been steadily reversing the price from the start of May.
The support level 1.3600 was strengthened by the lower daily Bollinger Band and by the 50% Fibonacci correction level of the previous upward impulse from January.
Given the predominant daily uptrend, oversold daily Stochastic and the rising bullish USD sentiment, USDCAD currency pair can be expected to rise further to the next resistance level 1.3700.
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#WaveAnalysis
#GBPAUD reversed from support level 1.8945;
Likely to rise to resistance level 1.3700.
GBPAUD currency pair recently reversed up from the powerful support level 1.8945, which has been repeatedly reversing the price from the start of May.
The price made numerous Japanese candlesticks reversal patterns near the support level 1.8945 – forming the daily Bullish Engulfing pattern just recently.
Given the predominantly bullish sterling sentiment seen across the FX markets today, GBPAUD currency pair can be expected to rise further to the next resistance level 1.9200.
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#GBPAUD reversed from support level 1.8945;
Likely to rise to resistance level 1.3700.
GBPAUD currency pair recently reversed up from the powerful support level 1.8945, which has been repeatedly reversing the price from the start of May.
The price made numerous Japanese candlesticks reversal patterns near the support level 1.8945 – forming the daily Bullish Engulfing pattern just recently.
Given the predominantly bullish sterling sentiment seen across the FX markets today, GBPAUD currency pair can be expected to rise further to the next resistance level 1.9200.
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The #crypto market cap fell by 0.8% in 24 hours to $2.11 trillion. An attempt to strengthen the market's offensive on news about inflation in the US attracted new sellers, which this time can easily be linked to the similar dynamics of the Nasdaq index, with which crypto has the closest correlation.
At the same time, the dynamics of the last 24 hours were not one-sided: Bitcoin lost 1.4%, Ethereum—0.3%, BNB—0.9%, and Solana—3.5%, but such coins as XRP, Toncoin, and many others added.
#Bitcoin is back at $57K after a failed assault on $60K on Thursday. Technically, the bears are keeping the price above the 200-day moving average. In fact, the sellers could be corporates whose actions are often closely tied to Nasdaq100 performance. German authorities were also actively selling off previously confiscated Bitcoins. This volume is not huge, but some potential buyers prefer to stay on the sidelines, seeing the overhang of sales.
At the same time, the dynamics of the last 24 hours were not one-sided: Bitcoin lost 1.4%, Ethereum—0.3%, BNB—0.9%, and Solana—3.5%, but such coins as XRP, Toncoin, and many others added.
#Bitcoin is back at $57K after a failed assault on $60K on Thursday. Technically, the bears are keeping the price above the 200-day moving average. In fact, the sellers could be corporates whose actions are often closely tied to Nasdaq100 performance. German authorities were also actively selling off previously confiscated Bitcoins. This volume is not huge, but some potential buyers prefer to stay on the sidelines, seeing the overhang of sales.
#Review
Promising divergence of Nasdaq100 and Russell 2000
Indices in the US went in different directions. While the market’s flagship gainer of recent years, the #Nasdaq100, has lost nearly 2.9% from its peak just after the CPI data, the index of small-cap companies, the #Russell2000, has soared 4.7% to date.
We saw one of the most notable one-day rotations in market history. This is only the second time since 1979 that the Russell 2000 has closed the day up over 3% (it was up 3.6%) against the backdrop of a decline in the S&P500. Considering the magnitude of the S&P500 and Nasdaq100 decline (0.7% and 2.3%, respectively), this was the largest divergence that occurred quite suddenly.
It’s easy to find justifications for a rally in a small-company index. A slowdown in inflation is a historically positive signal for such firms. Typically, during these periods, companies rebuild margins, getting a chance to keep up with the largest corporations.
Promising divergence of Nasdaq100 and Russell 2000
Indices in the US went in different directions. While the market’s flagship gainer of recent years, the #Nasdaq100, has lost nearly 2.9% from its peak just after the CPI data, the index of small-cap companies, the #Russell2000, has soared 4.7% to date.
We saw one of the most notable one-day rotations in market history. This is only the second time since 1979 that the Russell 2000 has closed the day up over 3% (it was up 3.6%) against the backdrop of a decline in the S&P500. Considering the magnitude of the S&P500 and Nasdaq100 decline (0.7% and 2.3%, respectively), this was the largest divergence that occurred quite suddenly.
It’s easy to find justifications for a rally in a small-company index. A slowdown in inflation is a historically positive signal for such firms. Typically, during these periods, companies rebuild margins, getting a chance to keep up with the largest corporations.
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It’s no secret that in previous months, the market has been pulled upward by a narrow AI narrative, while the breadth and strength of the stock market rally have been at “extreme fear” levels. Moreover, the Russell 2000 has been losing ground smoothly since May, pulling back deep into a multi-year range, while the Nasdaq100 has been methodically updating all-time highs since mid-May.
A sign of inflation is behind this big trade. April CPI data released in mid-May confirmed an acceleration in the pace of price increases and spooked markets so much that some speculated the next move would be a rate hike, not a rate cut. From this perspective, the Russell2000 index performed according to classic rules, giving up ground for a month after the strong May CPI release, sideways on neutral data in June, and soaring on the July release.
A sign of inflation is behind this big trade. April CPI data released in mid-May confirmed an acceleration in the pace of price increases and spooked markets so much that some speculated the next move would be a rate hike, not a rate cut. From this perspective, the Russell2000 index performed according to classic rules, giving up ground for a month after the strong May CPI release, sideways on neutral data in June, and soaring on the July release.
Following this logic, the Russell 2000 is poised for a prolonged rally, a strong start to what we saw the day before. Right now, the index has climbed to the March 2024 peak levels, which, if broken, would take it to its highest level since January 2022.
The Russell 2000 needs to rise 13.5% to reach the all-time highs set in November 2021. That’s not a lot, given the average annual performance, but it’s not so much when you look at how fast the index usually rallies.
A small-company index rally can provide the S&P500 and Nasdaq100 with that much-needed “breadth” and “strength,” adding flesh to that ‘Artificial narrative.
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The Russell 2000 needs to rise 13.5% to reach the all-time highs set in November 2021. That’s not a lot, given the average annual performance, but it’s not so much when you look at how fast the index usually rallies.
A small-company index rally can provide the S&P500 and Nasdaq100 with that much-needed “breadth” and “strength,” adding flesh to that ‘Artificial narrative.
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A soft US CPI report pushed #Gold above the $2400 mark. The price only climbed above it for a couple of hours in April and barely spent three days above this level in May. In both cases, these climbs shifted the balance to the sellers, followed by a dip below $2300. These episodes may have created a knee-jerk reflex, as the troy ounce price was down about 1% on Friday due to a relatively elevated risk appetite.
The gold price is approaching the upper end of the range of the last three months, which could be the end of a consolidation after rallying off the lows of October. There is logic to this idea, as this rally started on policy reversal signals. Recent months have been shrouded in uncertainty due to mixed inflation numbers. And now we are registering a rather high degree of willingness of the Fed officials to start easing soon.
From the technical analysis perspective, the potential upside target in gold in case of a resistance breakout is the level of $2850.
The gold price is approaching the upper end of the range of the last three months, which could be the end of a consolidation after rallying off the lows of October. There is logic to this idea, as this rally started on policy reversal signals. Recent months have been shrouded in uncertainty due to mixed inflation numbers. And now we are registering a rather high degree of willingness of the Fed officials to start easing soon.
From the technical analysis perspective, the potential upside target in gold in case of a resistance breakout is the level of $2850.
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#WaveAnalysis
#GBPUSD under bullish pressure;
Likely to rise to resistance level 1.3120.
GBPUSD currency pair is under bullish pressure after the earlier breakout of the resistance level 1.2850, which has been reversing the pair from 2023.
The breakout of the resistance level 1.2850 results from the simultaneously strongly bullish sterling sentiment and the equally weak USD sentiment.
GBPUSD can be expected to rise further to the next round resistance level 1.3120 (former multi-month high from the middle of 2023).
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#GBPUSD under bullish pressure;
Likely to rise to resistance level 1.3120.
GBPUSD currency pair is under bullish pressure after the earlier breakout of the resistance level 1.2850, which has been reversing the pair from 2023.
The breakout of the resistance level 1.2850 results from the simultaneously strongly bullish sterling sentiment and the equally weak USD sentiment.
GBPUSD can be expected to rise further to the next round resistance level 1.3120 (former multi-month high from the middle of 2023).
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#WaveAnalysis #AMZN
Amazon reversed from support level 192.15;
Likely to rise to the resistance level 200.00.
Amazon recently reversed up from the key support level 192.15, the former monthly high from May, acting as the support after it was broken in June.
The support level 192.15 was strengthened by the 20-day moving average and by the 38.2% Fibonacci correction of the sharp upward impulse 1 from last month.
Given the clear daily uptrend, Amazon can be expected to rise further to the next round resistance level 200.00 (which stopped the previous impulse wave 1).
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Amazon reversed from support level 192.15;
Likely to rise to the resistance level 200.00.
Amazon recently reversed up from the key support level 192.15, the former monthly high from May, acting as the support after it was broken in June.
The support level 192.15 was strengthened by the 20-day moving average and by the 38.2% Fibonacci correction of the sharp upward impulse 1 from last month.
Given the clear daily uptrend, Amazon can be expected to rise further to the next round resistance level 200.00 (which stopped the previous impulse wave 1).
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On Sunday, the #crypto market moved to a rapid rise, completing a consolidation after a correction. Cryptocurrencies positively played off the strengthening chances of Trump’s victory after the assassination attempt. In addition, buyers were clearly encouraged by how the market stood up to the roughly $2.9bn sell-off in Bitcoin by German authorities.
The technical picture in #Bitcoin is promising as it has managed to make a sharp move back into territory above the 200-day MA after 8 days of fluctuating below. The price is back at $62.9K, the area of the highs at the start of July. The next milestones will be the 50-day MA near $64K and the upper boundary of the descending channel near $67K by the end of July.
Price dips below $55K plunged the price below the 61.8% level from the rise of the September lows to the March highs, realising a classic Fibonacci retracement. Bitcoin’s ability to overcome $71.5K would trigger an upside scenario with a potential target of $104K (161.8%).
The technical picture in #Bitcoin is promising as it has managed to make a sharp move back into territory above the 200-day MA after 8 days of fluctuating below. The price is back at $62.9K, the area of the highs at the start of July. The next milestones will be the 50-day MA near $64K and the upper boundary of the descending channel near $67K by the end of July.
Price dips below $55K plunged the price below the 61.8% level from the rise of the September lows to the March highs, realising a classic Fibonacci retracement. Bitcoin’s ability to overcome $71.5K would trigger an upside scenario with a potential target of $104K (161.8%).
#Review #DXY
While Trump’s rise to power is widely seen as a positive for the dollar, the dollar index hit a one-month low on Monday as it continues to rebound from the Fed’s latest softening tone and inflation slowdown.
The impact of Trump’s policies on the dollar is largely based on the experience of his previous presidential term. As president, he imposed tariffs on imports and cut corporate taxes. Both elements are on his economic agenda again. Tariffs potentially reduce imports to curb trade deficits. Tax cuts encourage capital inflows.
However, both factors began to affect the dollar only after these policies kicked in. In addition, lawmakers effectively blocked these changes in the early months, making an early bet on the fundamental trend counterproductive.
Among the fundamentals, speculation around expectations for a Fed rate cut is now more influential. By the end of last week, markets were factoring in 3 consecutive cuts this year, starting in September, as the most likely scenario.
While Trump’s rise to power is widely seen as a positive for the dollar, the dollar index hit a one-month low on Monday as it continues to rebound from the Fed’s latest softening tone and inflation slowdown.
The impact of Trump’s policies on the dollar is largely based on the experience of his previous presidential term. As president, he imposed tariffs on imports and cut corporate taxes. Both elements are on his economic agenda again. Tariffs potentially reduce imports to curb trade deficits. Tax cuts encourage capital inflows.
However, both factors began to affect the dollar only after these policies kicked in. In addition, lawmakers effectively blocked these changes in the early months, making an early bet on the fundamental trend counterproductive.
Among the fundamentals, speculation around expectations for a Fed rate cut is now more influential. By the end of last week, markets were factoring in 3 consecutive cuts this year, starting in September, as the most likely scenario.
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Quite a bearish turn for the dollar, as only a couple of months ago, one of the working scenarios was ‘no cuts’ until the end of 2024.
Technical factors are as much a determinant of the dollar’s momentum as anything else, in our view. This July, the dollar index has been under a sell-off, falling out of an upward corridor from the lows of late last year.
The downward impulses came on important news: NFP pushed the dollar index through support; Powell's speech broke it under the 50-day MA; reaction on the CPI resulted in a dive below the 200-day MA.
The most cautious bears may wait for a failure under 103.70, where the DXY has found support in early June and April. This opens the way for the index to 100, close to the area of last year's lows. A leg below would activate a deeper dollar decline scenario with a potential target at 90-92.50, where the lower boundary is the area of 2018 and 2021 lows, and the upper one is 161.8% of the downside momentum from the September 2022 peak to the 2023 support area.
Technical factors are as much a determinant of the dollar’s momentum as anything else, in our view. This July, the dollar index has been under a sell-off, falling out of an upward corridor from the lows of late last year.
The downward impulses came on important news: NFP pushed the dollar index through support; Powell's speech broke it under the 50-day MA; reaction on the CPI resulted in a dive below the 200-day MA.
The most cautious bears may wait for a failure under 103.70, where the DXY has found support in early June and April. This opens the way for the index to 100, close to the area of last year's lows. A leg below would activate a deeper dollar decline scenario with a potential target at 90-92.50, where the lower boundary is the area of 2018 and 2021 lows, and the upper one is 161.8% of the downside momentum from the September 2022 peak to the 2023 support area.
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#WaveAnalysis
#GBPNZD broke pivotal resistance level 2.1190;
Likely to fall to support level 2.00.
GBPNZD recently broke above the pivotal resistance level 2.1190, which reversed the price multiple times from March to May.
The breakout of the resistance level 2.1190 accelerated the active impulse wave C of the intermediate ABC corrective wave (2) from the start of June.
Given the clear uptrend and the strongly bullish sterling sentiment, GBPNZD can be expected to rise further to the next resistance level 2.1600 (former multi-month high from August and the target for the completion of the active wave C).
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#GBPNZD broke pivotal resistance level 2.1190;
Likely to fall to support level 2.00.
GBPNZD recently broke above the pivotal resistance level 2.1190, which reversed the price multiple times from March to May.
The breakout of the resistance level 2.1190 accelerated the active impulse wave C of the intermediate ABC corrective wave (2) from the start of June.
Given the clear uptrend and the strongly bullish sterling sentiment, GBPNZD can be expected to rise further to the next resistance level 2.1600 (former multi-month high from August and the target for the completion of the active wave C).
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#WaveAnalysis
#NatGas broke key support level 2.200;
Likely to fall to support level 2.00.
Natural gas recently broke the key support level 2.200, intersecting with the 61.8% Fibonacci correction of the sharp upward impulse from February.
The breakout of the support level 2.200 accelerated the active impulse wave 3 of the sharp downward impulse wave (C) from the end of June.
Given the clear daily downtrend, Natural gas can be expected to fall further to the next round support level 2.00 (former minor support from April).
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#NatGas broke key support level 2.200;
Likely to fall to support level 2.00.
Natural gas recently broke the key support level 2.200, intersecting with the 61.8% Fibonacci correction of the sharp upward impulse from February.
The breakout of the support level 2.200 accelerated the active impulse wave 3 of the sharp downward impulse wave (C) from the end of June.
Given the clear daily downtrend, Natural gas can be expected to fall further to the next round support level 2.00 (former minor support from April).
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The #crypto market has rallied about 2% over 24 hours to a $2.34 trillion cap, with the slippage at the start of the day pushing the figure to $2.38 trillion, which was last seen on June 20th.
#Bitcoin and #Ethereum are testing their 50-day MAs on Tuesday after retreating from the more important 200-day MAs. A major correction and upside reversal has already finished earlier this month, so the $63K per BTC and $3500 per ETH levels now look like a temporary shakeout of positions but not impenetrable resistance.
According to data from CoinShares, crypto fund investments rose by $1.439 billion last week, following inflows of $441 million the previous week; the figure marked the second week of growth and was the fifth-largest weekly inflow on record. Investments in Bitcoin rose by $1.347 billion, Ethereum by $72 million, and Solana by $4 million, with Ethereum seeing the largest inflows since March, likely in anticipation of the imminent approval of spot ETH ETFs in the US.
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#Bitcoin and #Ethereum are testing their 50-day MAs on Tuesday after retreating from the more important 200-day MAs. A major correction and upside reversal has already finished earlier this month, so the $63K per BTC and $3500 per ETH levels now look like a temporary shakeout of positions but not impenetrable resistance.
According to data from CoinShares, crypto fund investments rose by $1.439 billion last week, following inflows of $441 million the previous week; the figure marked the second week of growth and was the fifth-largest weekly inflow on record. Investments in Bitcoin rose by $1.347 billion, Ethereum by $72 million, and Solana by $4 million, with Ethereum seeing the largest inflows since March, likely in anticipation of the imminent approval of spot ETH ETFs in the US.
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#Review #WTI
Oil is losing ground, once again threatening to fall below $80 per barrel WTI, despite a weaker dollar and strong gains in gold and equities. We may be seeing market participants trying to stay within the established pattern, but there’s a good chance that oil is reflecting a turn in the economy to a slowdown.
Oil is giving up ground for the second week, having reversed to the downside from $83.8. This is the development of a sequence of lower local highs since the beginning of 2022. The bulls failed to break through the resistance line despite the Fed's easing signals.
It seems that oil traders read signals of future demand problems in the signals from Powell and other FOMC members rather than anticipation of monetary easing. Oil is very sensitive to fluctuations in demand, and a 1-2% change in the supply-demand balance can change the price by tens of per cent.
Oil is losing ground, once again threatening to fall below $80 per barrel WTI, despite a weaker dollar and strong gains in gold and equities. We may be seeing market participants trying to stay within the established pattern, but there’s a good chance that oil is reflecting a turn in the economy to a slowdown.
Oil is giving up ground for the second week, having reversed to the downside from $83.8. This is the development of a sequence of lower local highs since the beginning of 2022. The bulls failed to break through the resistance line despite the Fed's easing signals.
It seems that oil traders read signals of future demand problems in the signals from Powell and other FOMC members rather than anticipation of monetary easing. Oil is very sensitive to fluctuations in demand, and a 1-2% change in the supply-demand balance can change the price by tens of per cent.
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The latest Baker Hughes report saw a further decline in drilling activity, with the number of active oil rigs falling to 478 (-1 for the week) - a new low since December 2021 and another reminder that current prices do not inspire investment in production expansion, only maintaining the status quo.
On the other hand, oil has failed to develop an offensive but has yet to break crucial support. Since last February, the price has been reversing to the upside after declines towards the 200-week moving average. The last attempt to break below was in early June. As a result, a sequence of higher local lows was formed.
On the other hand, oil has failed to develop an offensive but has yet to break crucial support. Since last February, the price has been reversing to the upside after declines towards the 200-week moving average. The last attempt to break below was in early June. As a result, a sequence of higher local lows was formed.