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Gold stumbles due to Fed rate hike expectations

Gold exhibited mixed performance this week, rising strongly and then pulling back from recent peaks. Analysts believe that gold's rally is currently on hiatus, and that the precious metal is ready to move in a different direction. Uncertainty surrounding the Federal Reserve's interest rate trajector is contributing to gold's slowed momentum.

At the start of the week, gold marginally increased, but gave up part of its gains and slipped by 0.80%. This was due to ambiguous macroeconomic data from the US, which nonetheless showed signs of resilience. US retail sales were also notably robust. According to current data, industrial production in America bounced back in April, while the manufacturing sector is facing difficulties.

Retail sales excluding autos went up by 0.4% m/m, which matched forecasts. Year-over-year, sales rose by 1.6%, below last month's 2.4%. Experts believe it indicates that the US economy is slowing down.

US industrial production grew by 0.5% m/m in April. Year-on-year, it rose to 0.2% from 0.1% in the previous months. According to the latest data, manufacturing production increased by 1% m/m. Furthermore, an uptick in automobile production was observed, bolstering the US dollar and dampening gold's upside prospects.

Macroeconomic factors and higher US government bond yields have weighted down on the precious metal. Consequently, gold has slightly declined. Its downward movement has accelerated by week's end. The precious metal has now bounced downwards from the key level of $2,000 per ounce. On Thursday morning, 18 May, XAU/USD was trading at $1,977, trying to recoup losses, but with limited success.

As the precious metal slides down, investors are now focused on new US data, which is set to be published later today. The next batch of data will help investors assess the state of the US economy and predict the Fed's next interest rate move. In addition, the US Department of Labor will release the initial unemployment claims report. Preliminary forecasts indicate that jobless claims fell by 10,000 in the first week of May after rising by 22,000 earlier, reaching its highest level since October 2021.

Uncertainty regarding the US debt ceiling is another important factor for gold. Continuing discussions on the issue has yet to find a solution. Earlier, US President Joe Biden met with Congress representatives to address the issue. Analysts estimate the current situation has pushed up the precious metal, which benefits from anxiety in the market. Gold is universally considered to be a traditional safe-haven asset that can protect the holder's capital.

Higher industrial production in the US has boosted the market. As a result, traders and investors are pricing in the possibility of another interest rate hike in mid-June. Analysts suggest that the change in market expectations has triggered another dollar movement, weighing down on gold.

Gold's noticeable decline has been attributed not only to the mixed US macroeconomic data, but also to the Federal Reserve's current decisions on interest rates. As a result, the precious metal is approaching its April lows. Analysts believe that due to increased expectations of another key rate hike, the gold correction will continue.

At the moment, Fed representatives maintain a hawkish stance, believing that this approach would make it easier to bring inflation under control and return it to the target of 2% in the future. This also affects possible upcoming rate moves. According to Fed officials, the rate has not yet reached a level that would allow a rollback of policy tightening.

In this situation, the precious metal is stalling, but some analysts are confident that it could increase. Currency strategists at Credit Suisse believe that gold will eventually reach new highs and rise above the $2,070-$2,075 levels achieved in 2020 and 2022.

According to Credit Suisse, the gold market will soar to new highs following the completion of the current range phase, facilitated by a decrease in real yields in the US. In this situation, exceeding $2,075 would indicate a bullish breakout, opening the way to a new target range of $2,330-$2,360.

Technical analysis indicates that gold is approaching the 50-day moving average. Experts say that stabilizing above this level solidified the gold rally at the end of 2022 and confirmed it in March 2023. At the same time, the 61.8% retracement level, which moved from March lows to early May highs, is located at $1,977 per ounce.

Experts estimate that gold should avoid a sharp drop below $1,980. Such a scenario would be an important signal of market sentiment change, pushing gold down to a critical level of $1,950 per ounce.

If gold stabilizes near current levels, then the next growth impulse will help it refresh historical highs. In this situation, the technical target for gold bulls will be $2,250, which was reached during the last two-month rally. The long-term target will be the ambitious level of $2,640, which may be reached within 12 months.

Experts believe the correction of the precious metal will continue if the likelihood of another Fed rate hike increases in June. The regulator's next meeting is scheduled for June 13-14. Most analysts (72%) expect the key rate to remain at 5%-5.25%, while some anticipate another increase by 25 basis points.

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EUR/USD. Steep plunge: The pair has hit multi-week price lows

The EUR/USD pair is plunging across all pairs, developing a downtrend. The EUR/USD bears managed to overcome the support level of 1.0770 (the upper limit of the Kumo cloud on the daily chart) – this is a multi-week price low (since March 27). The next barrier is at the 1.0650 mark (Kijun-sen line on the weekly chart). The key fundamental factor, thanks to which the greenback is gaining momentum, is still in force, so the downtrend is unlikely to weaken by the end of the current week. This refers to the threat of default in the U.S. The threat is not diminishing, but on the contrary, it's becoming stronger and more tangible with each day.

The situation is contradictory. On the one hand, everyone understands that the parties will eventually come to an agreement, as has been the case year after year. On the other hand, the world press continues to escalate the situation, modeling catastrophic scenarios if the US were to default on the national debt for the first time in history. And although there is a low probability of this scenario, it cannot be completely ruled out. Therefore, the conditional probability of "0.0 (...) 1%" is taken quite seriously by the market, with all the ensuing consequences.

Threat of Default or Groundless Panic?

The dollar is a beneficiary of the current situation. Due to the rising panic in the markets, the greenback is in high demand, including in the EUR/USD pair. Recent events suggest that in the coming days, American politicians are unlikely to find common ground on the issue of raising the debt limit. At least because the main "negotiator" - Joe Biden - is currently at the G7 summit in Japan. And although the US president cut his schedule, canceling a visit to Australia, he won't return to the US until Saturday. Therefore, at least until the end of this week, the situation will remain in a state of limbo, allowing the dollar bulls to feel confident in all currency pairs. The EUR/USD pair will not be an exception here.

Before heading to Japan, Biden declared he is confident, saying talks with congressional Republicans have been productive. According to him, he will maintain close contact with them during the trip and will hold face-to-face negotiations upon arrival. The White House head also reassured journalists that the U.S. would not default on the national debt.

Judging by the dynamics of the greenback, market participants reacted skeptically to Biden's optimistic statements, partly because he voiced similar rhetoric last weekend, ahead of another failed negotiation round. The seriousness of the situation is also indicated by the fact that Biden unexpectedly canceled planned trips to Australia and Papua New Guinea.

Therefore, traders' skepticism, in my opinion, is quite justified, as the parties only declare their intentions to make a deal, but it is assumed that the corresponding conditions put forward will be met.

As we know, the Republicans claim that an increase in the spending limit can only take place on the condition of significant spending cuts. In particular, they propose cutting tax credits for the purchase of electric cars and the installation of solar panels, as well as reducing government spending on education loan repayment. Democrats, on the other hand, reject such proposals and insist on raising the debt limit without any preliminary conditions.

To date, the sides have not been able to find a compromise, and this fact is supporting the safe dollar.

Growth of Hawkish Expectations

It should be emphasized that the dollar is strengthening its positions not only due to growing risk-off sentiments. The recent statements by Fed officials, which had a "hawkish hue", also lent support to the greenback. Despite the slowdown in US inflation, many members of the Fed do not rule out further steps to tighten monetary policy. For instance, Dallas Fed's head Lorie Logan stated that the incoming data "supports a rate hike at the next meeting."

This position, in one interpretation or another, was voiced by other representatives of the US central bank – specifically, Loretta Mester, Thomas Barkin, Raphael Bostic, and John Williams.

The market reacted to the tightening of rhetoric accordingly: according to the CME FedWatch Tool, the probability of a 25-point rate hike at the June meeting is currently 32%. For comparison, it should be noted that at the beginning of May, the chances of realizing a 25-point scenario were estimated at 5-8%.

Conclusions

The US dollar continues to enjoy high demand – firstly, amid risk aversion, and secondly – due to the growth of hawkish expectations regarding the future actions of the Fed. Such fundamental conditions contribute to the development of a bearish trend. If the Republicans and Democrats do not surprise the markets with an unexpected compromise, then the EUR/USD pair will likely keep heading towards the base of the 7th figure, and further to the support level of 1.0650 (the Kijun-sen line on the weekly chart).

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EUR/USD. Week Preview. Buckle up, price turbulence expected

The EUR/USD pair failed to consolidate within the 7th figure by the end of the past week: at the end of Friday, EUR/USD bulls organized a small but swift counter-attack, which led the price to rise to the level of 1.0804. The corrective pullback was due to a weakening of the US currency, which came under pressure against the backdrop of Federal Reserve Chairman Jerome Powell's cautious rhetoric.

Powell suggested that the May rate hike could be the last in the current monetary tightening cycle. This unexpected plot twist surprised dollar bulls, afterwards the greenback fell across the market. Under other circumstances, this fundamental factor would have had a strong impact on the dollar for a quite long time. But under current conditions, Powell's dovish comments may take a back seat. The focus is on the political confrontation between Republicans and Democrats, as its failure to reach an agreement could lead to a default on the US national debt.

There is no doubt that this topic will be the "number 1 issue" for all dollar pairs. All other fundamental factors will take a back seat - including Powell.

Biden raises the stakes

Exactly one week ago - May 14 - the President of the United States announced that negotiations with Congress on raising the debt limit are "progressing," and more about their progress will be known literally "in the next two days". At the same time, he emphasized that he is optimistic about the prospects of reaching a compromise. In anticipation of the next round of negotiations, assistants to the US president and the Speaker of the lower house of Congress, Kevin McCarthy, began to form a "road map" to curb federal spending in order to resume negotiations on raising the debt limit.

The negotiations did take place - but ended in failure. The parties just "agreed to agree", but no more. Now the situation is up in the air. Another round of negotiations should take place after Biden completes his visit to Japan, where the G7 summit is being held. At the same time, he canceled his planned visit to Australia, which speaks volumes on the seriousness of the situation.

Important point: if the US president was initially optimistic about the negotiation process, today he has changed the tone of his rhetoric. For example, he stated that declaring a default is "personally out of the question" for him, but at the same time, he cannot guarantee that Republicans will not push the country into default by "doing something outrageous" (originally by Reuters agency - "Biden said he still believed he could reach a deal with Republicans, but could not guarantee that Republicans would not force a default by "doing something outrageous").

In this context, Biden called on Congress to work on the issue of raising the debt limit. He also emphasized that he would not agree to a bipartisan debt ceiling deal "exclusively on the terms of the Republicans". The US president expressed readiness to cut spending, but stated that he does not intend to fulfill all the demands of Republican congressmen.

The terrifying word: "default"

Judging by the escalation of the situation, a default no longer seems unthinkable. One can assume that Biden has decided to raise the stakes with his rhetoric before decisive negotiations, shifting the responsibility for possible default consequences onto the Republican party. However, in the context of forex traders' reaction, it doesn't really matter - whether it's a bluff or a real threat. Such statements from the US president are capable of significantly shaking the markets. Considering that the aforementioned comments were made during the weekend, dollar pair traders should prepare for a significant gap (in the case of the EUR/USD pair - a downward gap).

Overall, the upcoming week is packed with events. For example, on Monday, three representatives of the Federal Reserve (Bullard, Barkin, Bostic) will speak; on Tuesday, PMI indices will be published in Europe, and data on the volume of new home sales will be released in the US; on Wednesday, the minutes of the Fed's May meeting will be published along with a speech by European Central Bank President Christine Lagarde; on Thursday, data on the volume of pending home sales will be disclosed in America; and finally, on Friday, the most important inflation indicator - the core personal consumption expenditures index - will be published in the US.

But all these reports, as well as the speeches of Fed and ECB representatives, will remain in the shadow of the key topic of the upcoming week. The fate of the US national debt is the number 1 issue for dollar pair traders, so everyone will focus on its corresponding negotiations. Especially since there is not much time left until the "X hour": as the US Treasury previously warned, on June 1, the country's government may declare a debt default if Congress cannot raise the debt limit.

Conclusions

Under such fundamental circumstances, it is extremely difficult to predict the possible trajectory of EUR/USD. We can only assume that at the start of the new trading week, risk-off sentiments in the markets will rise again, and this fact will provide significant support to the dollar. In this case, the pair will return to the area of the 7th figure with a target at 1.0700. But everything will depend on the negotiation between Republicans and Democrats. If they do find common ground and announce an increase in the debt limit, the spring will unwind in the opposite direction - against the dollar (especially in light of Powell's recent statements). If the negotiation saga drags on until next weekend, the dollar will continue to gain momentum, acting as a beneficiary of panic sentiments.

Considering the previous statements of Republicans, Democrats, and Biden himself, the negotiations will be very challenging - therefore, dollar pairs may once again find themselves in the area of price turbulence.

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Hot forecast for GBP/USD on 23/05/2023

Throughout Monday, the pound was mostly stagnant, and this won't last for long, so the market will definitely come alive today. Especially since preliminary PMIs are scheduled for release. However, the forecasts for the UK are not optimistic. In particular, the services PMI is expected to fall from 55.9 to 55.3. However, the manufacturing PMI is likely to remain unchanged. Due to the services sector, the composite PMI is expected to fall from 54.9 to 54.7.

However, this will not lead to a significant decline in the pound. The situation in the United States is quite similar. Although the manufacturing PMI may increase from 50.2 to 50.3, the services PMI is likely to fall from 53.6 to 53.0. Therefore, the composite PMI will fall from 53.4 to 53.0. Considering the overbought condition of the dollar, weak US data will ultimately lead to an increase in the pound. Even If the UK releases weak reports.

The GBP/USD pair failed to enter a full-fledged recovery phase. The volume of long positions fell around the 1.2480 level, leading to a reversal.

On the four-hour chart, the RSI is moving in the lower area of the indicator, which may indicate a persistent bearish sentiment.

On the same time frame, the Alligator's MAs are headed downwards, confirming the corrective movement.

Outlook

The corrective cycle from the peak of the medium-term trend persists, as the downward cycle continues after a recent retracement. The volume of short positions will increase once the price stays below the 1.2390 level. Until then, the bearish sentiment may be replaced by a consolidation within the scope of the recent retracement.

The comprehensive indicator analysis in the short-term and intraday periods points to the downward cycle.

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Gold's rally pauses, with new surge on horizon

Gold's upward momentum has paused after this week's mixed performance. However, analysts remain optimistic and believe that gold will surge to new highs. Despite the current setback, unfavorable external factors continue to drive capital inflows into gold, bolstering its future ascent.

This week, gold had a mixed performance, regaining ground after a two-day decline.The anticipation of the Federal Reserve's May meeting minutes fueled the precious metal's growth. On May 24, June futures on the New York Comex exchange edged up by 0.27% to reach $1,979 per ounce.

The Fed meeting minutes revealed that most policymakers believe further interest rate hikes are unwarranted. Additionally, the FOMC economic outlook projected the economic climate will worsen, as well as tighter lending conditions. Although officials foresee a moderate recession, they expressed concern over persistently high inflation, which currently is well above the 2% target. If inflation's decline remains sluggish, additional monetary policy tightening may be necessary.

These developments, combined with a stronger US dollar, sent gold into a retreat. On the evening of May 24, June futures on the New York Comex exchange slid by 0.45% to settle at $1,965 per ounce.

Gold currently faces considerable pressure from the surging USD, which has created headwinds for the precious metal. This week, gold stepped back from its key multi-year highs of $2,063-$2,075. However, Credit Suisse analysts believe that gold will eventually break through to new record highs.

Several factors, including concerns surrounding the US debt ceiling, have hindered gold's ascent for the time being. It has temporarily retreated from its key resistance level of $2,063-$2,075, the highs it hit in 2020 and 2022. Nonetheless, this appears to be a temporary setback. According to Credit Suisse, the next support level for gold stands at $1,949. A breakout below this level could push XAU/USD down to $1892 per ounce.

However, after this correction, analysts at the bank anticipate a resurgence in gold prices, driven by declining real yields in the United States. This drop is expected to intensify by the end of 2023. In a bullish scenario, gold could rally to $2,075, signifying a breakthrough for the precious metal. This would open the way towards new highs, particularly the range between $2,330 and $2,360, as highlighted by Credit Suisse.

Currently, gold's rally has taken a breather, settling at modest levels. On May 25, the price of gold stood at $1,963, ready to surge higher. The recent decline can be attributed to the US dollar's advance. The US currency gained strength against other major currenices ahead of the release of US economic data.

Investors are closely monitoring the US GDP data, which are set to release on Thursday, May 25th. Early forecasts suggest that the US economy has grown by 1.1% in the first quarter of 2023, in line with an earlier outlook by the US Commerce Department.

The greenback upsurge has also influenced the precious metal significantly. It is worth noting that gold is sensitive to signals emanating from the Federal Reserve. The current monetary policies of the regulator, coupled with the performance of USD, have a tangible impact on the precious metal's price. Hawkish signals from the Fed lend support to the dollar, making gold more expensive for foreign buyers. Conversely, dovish comments from FOMC policymakers weigh down on the American currency, driving gold higher.

Currency strategists at Commerzbank remain convinced that gold will move higher, as mounting default risks in the US make the precious metal more attractive for investors. In the event of a default, gold would come to the forefront, emerging as the most popular safe-haven asset. The bank underscores that the Federal Reserve will have ample opportunities to reduce interest rates, offering gold a competitive edge over other safe-haven assets such as the US dollar, the Swiss franc, and the Japanese yen.

UBS and Bank of America are particularly bullish on gold, expecting it to rise up to $2,200 per ounce. UBS currency strategists believe that gold will hit that level by March 2024, whereas analysts at Bank of America expects that level to be reached by the end of 2023. A key driver behind gold's assured growth lies in its sustained high demand from central banks.

Experts argue that the rise in gold prices requires the dollar to slide down gradually. UBS forecasts suggest that over the next 6-12 months, the greenback will experience a modest decline as the Federal Reserve prepares to conclude its monetary tightening cycle. This view is shared by the Bank of America, which expects the Fed's rate hike cycle to end, as well as substantial gold purchases by central banks.

Another factor favoring a gold rally is the mounting risk of a recession in the United States. Further key interest rate hikes and a deteriorating economic situation in the world's leading economy are making an economic downturn in the US more likely.

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No progress in the negotiations on the U.S. debt ceiling. Markets are getting more nervous. Overview of USD, CAD, JPY

U.S. stock markets are down for the second straight day without any sign of an agreement on the debt ceiling, and the clock is ticking louder in anticipation of the "day of decision", which, according to current calculations, is set for June 1st, as confirmed by Treasury Secretary Yellen.

FOMC minutes reflect a somewhat contradictory nature of most comments. "Some" officials felt that additional tightening was probably warranted, while "some" concluded that it might be time to end the hikes. That's it, and understand it however you want.

Nevertheless, the futures market shows a weak momentum in favor of a more prolonged tightening. The probability of another rate hike on June 14th has reached 30%, and in July, it is already 44%, while expectations of the first cut have shifted to December.

Expectations for interest rates, albeit weak, are in favor of the US dollar, which continues to strengthen across the entire currency market.

On Thursday morning, Germany's GDP data for Q1 was published, which turned out to be noticeably worse than expected, causing EUR/USD to decline. This is another factor in favor of the dollar.

The main focus remains on discussions about the debt limit, and any specific details can sharply increase volatility.

USD/CAD

Bank of Canada Governor Tiff Macklem expressed concerns about inflation risks at the end of last week. Core inflation remains stable and shows no signs of decline, and the housing market is growing confidently, largely due to the highest migration rates to Canada among all developed economies.

The probability of the Bank of Canada reconsidering its decision to pause rate hikes, which was made in January, currently appears high. Scotiabank analysts expect that the rate could be raised as early as the next meeting in June. If these expectations are confirmed, the Canadian dollar will receive a strong driver for growth.

Speculative positioning on CAD remains consistently bearish, with a net short position of -3.2 billion at the end of the reporting week. The calculated price is below the long-term average, but there is no direction.

Trading continues near the mid-range values of the sideways range, without a clear direction, and there are currently no obvious reasons capable of causing a strong movement in either direction. A bit more likely is a movement towards the upper limit of the technical pattern at 1.3770/90.

USD/JPY

Bank of Japan Governor Kazuo Ueda delivered his first speech as the head of the central bank. He expressed a strongly dovish approach, giving no hints of any need for immediate action.

Regarding monetary policy, Ueda stated, "BoJ will patiently sustain the easy monetary policy." It appears that no adjustments to yield curve control are expected at the upcoming meeting on June 15-16, and expectations of possible changes are shifted to the next meeting on July 27-28.

It is also worth noting that the BOJ was the only major central bank that refrained from changing its monetary policy while others hastily raised rates to combat inflation. These efforts paid off as global inflation began to decline, and Japan experienced a decrease in external inflationary pressure without taking any action of its own. This reduces the need for the BOJ to take measures to change its policy.

The net short position on JPY increased by 0.3 billion during the reporting week to -5.9 billion, and the calculated price sharply increased, indicating the strength of the bullish momentum.

USD/JPY managed to update the previous local high at 137.92, and the yen reached resistance at 139.60 (50% retracement of the sharp decline from November to January), with the next resistance at the channel limit of 140.80/141.00. The main reason for the yen's weakness is that expectations regarding the BOJ's monetary policy change after the new leadership took office did not materialize, and now a downward reversal is possible only in the event of a sharp increase in demand for safe-haven assets or after a clear signal from the BoJ, which the markets do not expect before July.

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Positive news contributes to an increase in risk demand, and the dollar braces to strengthen. USD, EUR, GBP overview.

The main news of the weekend was the agreement on the US debt limit, which may serve as a basis for increased risk demand at the beginning of the week. The House of Representatives is expected to vote on Wednesday.

It was reported that the debt ceiling will be approved until the 2024 presidential elections. Non-defense spending will remain at current levels in 2024 and will increase by only 1% in 2025. This is a compromise between Republican demands for sharp spending cuts and Democratic intentions to raise taxes.

The aggregate short position in the US dollar decreased by 3.3 billion to -12.1 billion during the reporting week. Overall, sentiment towards the dollar remains negative, but the trend may have changed.

Long positions on gold have noticeably decreased by 4 billion to -31.7 billion, which is also a factor in favor of the US dollar.

The core PCE deflator increased by 0.4% MoM, which is slightly higher than the consensus forecast of 0.3%. Despite the faster-than-expected price growth, real consumer spending rose by 0.5% MoM, surpassing the expected 0.3%. The rise in the PCE deflator shows that the fight against inflation is far from over, with the 3-month annualized core PCE deflator at 4.3%, the same amount as a year ago in April 2022.

The combination of higher spending and faster price growth is expected to lead to the Federal Reserve raising rates in June. Cleveland Fed President Loretta Mester, commenting on the released data, stated that "the data that came out this morning suggests that we still have work to do."

The CME futures market estimates a 63% probability of a Fed rate hike in June, compared to 18% the previous week, making the strengthening of the dollar in the changed conditions more than likely.

Monday is a banking holiday in the US, so by the end of the day, volatility will decrease, and we do not expect strong movements.

EUR/USD

The European Central Bank maintains a firm stance on continuing rate hikes as part of its fight against inflation. Preliminary inflation data for the eurozone will be published on June 1st, and the forecast suggests a slowdown in core inflation from 5.6% to 5.5%. If the data aligns with expectations, it will lower the ECB rate forecasts and put more pressure on the euro.

The net long position on the euro decreased by 2.013 billion to 23.389 billion during the reporting week, marking the first significant decline in the past 10 weeks. The calculated price is moving further south, indicating a high probability of further euro weakening.

EUR/USD has declined to 1.0730, where support has held firm, but we expect another attempt to test its strength, which will likely be more successful. Within a short-term correction, the euro may rise to resistance at 1.0735 or 1.0830, but the upward movement is likely to be short-lived and followed by another downward wave. Our long-term target is seen in the support zone of 1.0480/0520.

GBP/USD

The decline in UK inflation is once again being called into question. The core Consumer Price Index rose from 6.2% YoY to 6.8% in April, with yields sharply increasing. The retail sales report for April, published on Friday, showed that the slowdown in consumer demand remains more of a goal than reality itself.

Retail sales excluding fuel increased by 0.8% MoM, significantly higher than the forecast of 0.3%. If it weren't for the sharp decline in energy demand, both the monthly and annual retail growth would have been noticeably higher than expected.

Monday is a banking holiday in the UK, and there are no macro data this week that could influence Bank of England rate forecasts. Therefore, the pound will be traded more in consideration of global rather than domestic factors. We do not expect high volatility or significant movements.

The net long position on the pound slightly decreased by 84 million to 899 million during the reporting week. The bullish bias is small, and the positioning is more neutral than bullish. The calculated price is below the long-term average and is downward-oriented.

The pound has moved towards the support zone at 1.2340/50, but the decline has slowed down at this level. We expect the pound to fall, with the nearest targets being the technical levels at 1.2240 and 1.2134. There is currently insufficient basis for reviving growth.

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Hot forecast for GBP/USD on 02/05/2023

Yesterday, the pound showed impressive growth. Similarly, the euro also showed significant gains. Considering that there was no macro data from the UK, unlike the eurozone, it is more accurate to say that the pound followed the euro. However, this growth contradicted all the macro data. After all, eurozone inflation slowed down significantly more than expected, while employment in the United States increased substantially more than anticipated. So, the dollar should have extended its growth. But the market went in a different direction, and the formal reason for this was the minutes of the European Central Bank's governing council meeting, which mentioned the possibility of more interest rate hikes.

However, the meeting itself took place before there were even rough forecasts for the current inflation. Just a couple of days ago, several ECB officials explicitly stated that the cycle of interest rate hikes may have come to an end. So, the rise of the euro and, along with it, the pound, goes against common sense. Unless we consider the excessive overbought condition of the dollar, which became the main reason why European currencies increased.

However, there is a high probability that today everything will return to the values at the start of yesterday's trading. Employment data clearly suggests that the content of the US Department of Labor report will be slightly better than expected. In particular, unemployment, which was expected to increase from 3.4% to 3.5%, may well remain unchanged. But if unemployment does increase, the dollar may continue to lose its positions, primarily due to the persistent overbought condition.

During the intense upward movement, the GBP/USD pair jumped above the 1.2500 level. This served as the primary signal of the pound's recovery process relative to the recent corrective move.

Due to the sharp price change, on the four-hour chart, the RSI reached the overbought zone, which indicates that long positions are overheated in the intraday period.

On the four-hour period, the Alligator's MAs are headed upwards. This indicates a shift in trading interests.

Outlook

In this situation, the sharp price change from the day before is a signal of the pound's overbought conditions in the intraday and short-term periods. The target level is set at 1.2550, around which the upward cycle slowed down, which reduced the volume of long positions and resulted in a stagnation. We can assume that the process of the pound's recovery will be temporarily interrupted by a pullback. However, if the price remains stable above 1.2550, speculators may ignore the technical signal of overbought conditions. In this case, the pair can rise towards the peak of the medium-term trend.

The complex indicator analysis in the short-term and intraday periods points to the pound' recovery process.

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Hot forecast for EUR/USD on June 9, 2023

It seems that the market is simply tired of the excessive overbought condition of the dollar, and investors initiated a sell-off, even despite fairly good US data. The number of initial unemployment claims increased by 28,000, which is quite significant. However, the number of continued claims fell by 37,000. And they have much greater significance than initial claims. And logically, the dollar should have been rising. But the dollar's overbought condition has persisted for quite some time. In fact, it's still overbought. Yesterday's growth only managed to relieve a bit of the tension. But if the corrective movement started without any reason, it is likely to persist today.

The EUR/USD is ending the trading week with a sharp rise, during which the local June high was updated. The price approached the level of 1.0800, which acts as resistance for buyers.

On the four-hour chart, the RSI almost reached the overbought territory during the overnight sharp rise, but it did not cross the signal level. Take note that the indicator's convergence with the overbought territory coincides with the price approaching the resistance level of 1.0800. Thus, the combination of technical signals may indicate a decline in the volume of long positions on the euro.

On the four-hour chart, the Alligator's MAs have changed direction and it currently points to growth.

Outlook

The decline in the volume of long positions on the euro has led to a slowdown in the upward cycle, where the 1.0800 level plays a special role in the distribution of trading forces. In this case, in order to continue the upward movement, the price needs to stay above the control level, at least in the four-hour period. Otherwise, a full-scale price rebound may occur.

The complex indicator analysis unveiled that in the short-term and intraday periods, indicators are providing an upward signal.

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The Fed and the ECB will provide new guidance to the markets. Overview of USD, EUR, GBP

This week, several of the largest central banks will start monetary policy deliberations following the recent hawkish surprises from the Reserve Bank of Australia and the Bank of Canada. The Federal Reserve, European Central Bank, Bank of Japan, and the People's Bank of China could trigger significant movements in the currency market.

The Fed will be the first to announce its decision, which will take place on Wednesday evening. It is expected that the FOMC will pause and hold rates steady but maintain the suspense in favor of another rate hike in July, while expectations for the start of a rate-cutting cycle confidently shift towards the end of the year. Overall, the expectations favor the dollar.

Bearish sentiment towards the US dollar has been declining for the third consecutive week. The aggregate short position has decreased by $3.5 billion to -$8.26 billion, marking the largest single change in favor of the dollar since the beginning of the year.

Take note that all major currencies have adjusted in favor of the dollar without exception. At the same time, the net position in gold has increased by $1.313 billion to $34.487 billion, which indirectly indicates both persistent inflationary expectations and the fact that risks for the global economy sliding into a global recession are still high.

Oil prices are declining, despite overall positive risk sentiment. It appears that Saudi Arabia's decision to reduce production by 1 million barrels per day did not help sustain oil prices at high levels, perhaps markets are now more focused on the ongoing sale of oil reserves.

Simultaneously, concerns about a slowdown in economic growth in China are growing, which could further pressure global demand. Goldman Sachs has revised its oil price forecasts downwards for the third time in six months.

EUR/USD
The ECB will hike its key interest rate by 25 basis points on June 15 (Thursday), which is already fully priced in by the markets. In addition, an announcement will be made regarding the end of reinvestments within the APP program from July. The meeting will also include new staff forecasts and commentary on monetary policy going forward.

As markets are now focused mainly on signs of lower inflation, there could be a strong reaction to a possible dovish signal from the ECB, which would lead to a sell-off in the euro, but a hawkish sounding central bank could be ignored.

At present, the rate forecast implies another 25 bps hike in July, meaning the final rate is expected to be 50 basis points higher than the current level of 3.25%.

The net long position in EUR has decreased by $1.063 billion to $21.175 billion over the reporting week. The bullish bias is still high, but a reduction has been observed for the third consecutive week, with the calculated price moving further downward.

A week ago, we saw a high probability of further decline in EUR/USD. This forecast remains valid, and the recent local high at 1.0797 is considered a correction. We expect that bulls will encounter resistance near the technical level of 1.0810. If the ECB confirms its hawkish stance on Thursday, the corrective rally may generate another upward trajectory towards the resistance at 1.0865. However, take note that the long-term trend is bearish, and once bullish attempts have ended, a reversal to the downside is expected. The long-term target is still seen in the support zone of 1.0480/0520.

GBP/USD
The Bank of England will hold its next meeting next week, and the upcoming macroeconomic data in the following days can be crucial for its position.

The labor market report was just released, and despite the decline in the unemployment rate, the growth in average wages continues, at a higher pace than expected. The growth in average wages for the three months up to April reached 7.2% compared to the previous month's 6.8% (forecast 6.9%). The growth including bonuses also accelerated from 6.1% to 6.5%.

The report strengthens inflation expectations and increases the chances of a hawkish sounding BoE, which may be reflected in the Bank's inflation forecast to be published on Friday. Comments from BoE officials appear hawkish - Haskell supports further rate hikes, and Mann notes the persistent upward pressure on inflation. These comments have increased the yield of British bonds and reinforced expectations of further rate hikes. The futures market now sees the peak of the BoE's rate at 5.50% by the end of the year.

Thus, in the short-term perspective, the pound has the potential to strengthen slightly. However, investors are not rushing to make bets on the pound in the long run. The net long position in GBP has slightly decreased by £57 million to £969 million over the reporting week. The positioning is bullish, but the excess is insignificant. The calculated price is below the long-term average and is downward-directed.

Based on this, we continue to prioritize the bearish momentum, despite the pound's attempts to correct higher. We expect that the corrective rally will end below the local high of 1.2678, and any attempt to test it will be unsuccessful, leading to a reversal of GBP/USD to the downside. The nearest target is 1.2305, followed by 1.2240 and 1.2134.

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USD gains momentum following FOMC meeting

The US dollar has rallied robustly following the Federal Reserve's latest FOMC meeting, outpacing its European counterpart. USD found its wings, soaring on the back of the FOMC meeting outcomes which signaled another rate hike in 2023.

Following the June FOMC meeting, the committee maintained the federal funds rate within the range of 5.00%-5.25%, after a series of ten consecutive increases, meeting market expectations. The regulator hasn't ruled out another rate hike before the end of this year.

At the same time, Fed Chairman Jerome Powell unveiled an updated forecast, indicating that FOMC members anticipate an additional 0.50% increase in the federal funds rate in 2023.

According to experts, the Fed has now implemented the most aggressive series of rate hikes since the 1980s. This measure was necessary to combat inflation, which has decreased from its peak (9.1%) in June 2022 to the current 4%.

In the light of these developments, US government bond yields showed steady growth, bolstering the greenback. Consequently, the US dollar significantly appreciated against other major currencies, especially the euro.

Analysts assert that high rates impact the cost of US debt placement. According to the US Treasury Department's estimates, as of the end of April 2023, interest payments on the national debt stood at $460 billion, accounting for 12.5% of the total US budget.

After raising the debt ceiling, US authorities intend to issue new debt obligations that could exceed $1-$1.5 trillion. Therefore, the Fed has paused the rate hikes to avoid increasing the cost of placement and creating additional strain on the budget.

Experts underscore that if the interest rate is raised this year, we can expect a strengthening of the dollar. Against this backdrop, the EUR/USD pair confidently crossed the 1.0800 threshold and moved higher. The euro found balance while the greenback gained momentum for further growth. On Thursday morning, June 15, EUR/USD was trading at 1.0806, striving to reach new highs and establish a foothold at these levels.

Post FOMC meeting, the Fed's chief, Jerome Powell, held a press conference and commented on the monetary policy outlook. He emphasized the Fed's decision to maintain the federal funds rate at 5%-5.25%, stating that "rate cuts this year would be imprudent." However, the situation may change at the next meeting which will take place on July 25-26.

The FOMC statement underscored that US inflation remains high, but monetary authorities are aiming to bring it down to the target of 2%. According to the Fed Chairman, getting inflation back to 2% "is a long journey ahead." Meanwhile, the FOMC members remain very vigilant about inflationary risks.

Almost all FOMC members deem it appropriate to continue increasing rates in 2023. Special attention from the regulators is directed towards creating conditions for a "soft landing" of the US economy. The FOMC believes that this is facilitated by a strong US labor market, which is "gradually cooling down."

In addition, the Federal Reserve has published updated economic forecasts, which have been revised since the March meeting. The forecasts for US GDP growth in 2023 were raised, while they were slightly lowered for 2024-2025. As for the inflation forecast for this year, it has also been slightly worsened. However, the improvement in core inflation plans in the US provided a silver lining.

As for the median forecast for the key rate at the end of 2023, the situation is also positive: it was raised by 0.5% to a level of 5.6%. It's worth noting that this forecast anticipates two more rate hikes of 25 basis points each. As for the key rate forecast at the end of 2024, it was improved by 0.3% to the level of 4.6%, and at the end of 2025, also by 0.3% to 3.4%.

According to Jerome Powell's statement, rate increases should occur not abruptly but at a "moderate pace". The Fed chief believes that it will go hand in hand with a decrease in inflation. However, the latter will require US economic growth and "some easing of labor market conditions". Currently, markets are pricing in the probability of a 25 basis point rate hike at the next regulatory meeting scheduled for July 25-26. It is expected that this will once again help the dollar reach new highs.

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Is the FOMC being overly cautious? Powell's speeches

The dollar is going through difficult times, and it is pretty clear to everyone. However, there's a good chance of improving its situation in the near future. In this article, we will try to understand why. First and foremost, I would like to mention that both instruments are currently in positions from which downward waves can start forming. Wave analysis is currently quite objective and unambiguous. There's a possibility of further growth, but there's still a higher probability of a decline. Another important fact to mention is the prolonged decline of the USD. This is only a speculative assumption as trends can take on a very prolonged form, especially when supported by the news background. And the current news background allows for the dollar's growth.

To answer the question "why?" We need to try to look at the big picture. If the euro and the pound have been rising for almost a whole year, it is clear that the market has been responding to some news background. This could be the interest rate hikes by the Bank of England and the European Central Bank. For example, last year, when the Federal Reserve was raising rates faster and stronger, the dollar was getting stronger. Sooner or later, there will come a moment when the ECB and the BoE will finish tightening their monetary policies. In my opinion, this moment is approaching.

Fed Chairman Jerome Powell may announce in Congress this week that the interest rate will increase one more time if the situation requires it. However, the dollar is not particularly affected by this announcement, as it has been declining for almost a whole year. One rate hike will not lead to a significant appreciation of the dollar. The FOMC is steadily moving towards its goal. Inflation has already decreased to 4%. At this level, the ECB or the BoE could relax and let inflation return to the target level on its own. But not the Fed. The goal is to bring inflation back to 2% as soon as possible. Therefore, it is possible that the Fed is being overly cautious in case the decline in the consumer price index is interrupted. However, this fact does not mean much for the dollar.

Based on everything mentioned above, I believe that at the moment, it is highly probable that the tightening cycles in the UK and the EU will come to an end, as well as the wave analysis, which is currently providing very good sell signals for both instruments.

Based on the analysis conducted, I conclude that a new downtrend is currently being built. The instrument has enough room to fall. I believe that targets around 1.0500-1.0600 are quite realistic. I advise selling the instrument using these targets. I believe that there is a high probability of completing the formation of wave b, and the MACD indicator has formed a "downward" signal. You can sell with a stop loss placed above the current peak of the presumed wave b.

The wave pattern of the GBP/USD instrument has changed and now it suggests the formation of an upward wave that can end at any moment. Currently, it would be advisable to recommend buying the instrument only if there is a successful attempt to break above the 1.2842 level. You can also sell since the first attempt to break through this level was unsuccessful, and a stop loss can be set above it. However, be cautious on Thursday since there's a chance that the market's reaction to the BoE meeting may provoke sharp movements.

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The dollar train has already left

The Federal Reserve has clearly won the fight against inflation. Victory is not inevitable, and its timing is not determined, but no one is talking about stagflation or hyperinflation at the moment. The markets responded favorably to the June consumer price index, fueling the dollar sell-off. EUR/USD surged to 15-month highs, and this is far from the limit. Economists at Deutsche Bank expect EUR/USD to rise to 1.15 by Q4 2023, while Eurizon SLJ Capital suggests the 1.2 level.

When the divergence in monetary policy between the European Central Bank and the Federal Reserve is accompanied by heightened global risk appetite and the decline of American exceptionalism, the US dollar is forced to raise the white flag. Currently, the gap between consumer and producer prices is at a record high. When such situations have occurred in the past, stock markets have risen. This has happened either in the very late stages of a recession or in the early stages of an upturn.

Dynamics of final demand and finished goods prices in the US
It is quite possible that the United States will be able to avoid the recession that has been talked about for so long. The markets are envisioning a Goldilocks scenario—a combination of slowing inflation and steady GDP growth just below trend. It's no wonder that the S&P 500 reached a 15-month peak. It is difficult for the US dollar, as a safe-haven asset, to withstand such a significant improvement in global risk appetite.

The Fed's aggressive policies will eventually start to slow down the economy. Meanwhile, China is likely to accelerate the recovery of its GDP, which will have a favorable impact on the export-oriented eurozone. As a result, the bullish factor of American exceptionalism for the US dollar will become a thing of the past.

The hawkish comments from FOMC officials don't help the EUR/USD bears either. Christopher Waller still expects a federal funds rate hike to 5.75% and claims that making decisions based on a single inflation report is reckless. We can't sit and wait for the economy to cool down. It's like waiting on the platform for a train that has already left.

At the same time, the euro is supported by the minutes of the June ECB meeting and a speech by Isabel Schnabel. The ECB official said that despite the slowdown in inflation, markets are sending different signals. They reflect investors' concerns about whether the central bank has done enough to tackle high prices. In the latest Governing Council meeting, one official voted for an immediate 50 bps rate hike.

It seems that the ECB is not planning to stop, while the Fed may force a significant inflation slowdown. Along with heightened global risk appetite and the loss of American exceptionalism, this allows us to expect that the euro will continue to rally against the US dollar.

Technically, on the EUR/USD daily chart, reaching targets at 127.2% and 224% based on the AB=CD pattern increases the risk of a pullback. For this to happen, the pair would need to drop below the pivot level of 1.1215. Any decline should be used to form long positions.

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Intriguing trends in the US stock market: Dow Jones confidently grows by 0.47%, but what awaits other indices?

Shares of Johnson & Johnson became the real stars of the day, gaining 6.07%, closing at 168.38. Significant growth was also noted in the shares of Goldman Sachs Group Inc, rising by 3.03% and closing at 350.86, while Boeing Co showed a price increase of 2.40%, settling at 213.61.

Meanwhile, some sectors, such as technology, consumer goods, and consumer services, experienced negative dynamics. It's surprising, as the market is such that today some sectors may experience a decline, while tomorrow becoming the leaders of growth.

It is interesting to note that the markets evaluate ambiguous macro-statistics, and this affects the overall picture. The number of initial jobless claims in the US for the week surprised experts by decreasing by 9 thousand to 228 thousand, while the forecast suggested an increase to 242 thousand. However, the number of home sales transactions in the secondary market in the US decreased by 3.3% in June compared to May, reaching 4.16 million transactions, against the forecast of 4.2 million.

The New York Stock Exchange also didn't stay away from the market's diverse movements. The Dow Jones index demonstrated a slight increase of 0.47%, reaching a 52-week high. Meanwhile, the S&P 500 index slightly fell by 0.68%, and the NASDAQ Composite index decreased by 2.05%.

Days like these, full of volatility and opportunities, always keep investors on their toes. It's precisely during such moments that unique chances and advantageous opportunities arise for true adventurers in the financial markets.

At the top of the growth were the shares of Johnson & Johnson (NYSE: JNJ), showing unwavering strength, with a gain of 6.07%, equivalent to 9.64 points, and closing at 168.38. In second place were the quotes of Goldman Sachs Group Inc (NYSE: GS), which, like sprinters, rose by 3.03% or 10.31 points, finishing the session at 350.86. We cannot overlook Boeing Co (NYSE: BA), which added 2.40% or 5.01 points to the price of its shares, closing at 213.61.

While growth characterized the leaders, there were also those who faced challenges and dropped from the top. Among the declining stocks, Intel Corporation (NASDAQ: INTC) drew attention, losing 3.16% or 1.09 points, closing the session at 33.37. However, the shares of Salesforce Inc (NYSE: CRM) demonstrated strength and growth of 2.65% or 6.21 points, closing at 228.16. Microsoft Corporation (NASDAQ: MSFT) encountered some difficulties, losing 2.31% or 8.21 points but still holding at 346.87.

Impressive growth is also characteristic for some components of the S&P 500 index. For example, the shares of Zions Bancorporation (NASDAQ: ZION) rose by a significant 9.98%, reaching the mark of 37.90. And, of course, our growth leader of the day is Johnson & Johnson (NYSE: JNJ), showing remarkable growth of 6.07% and closing at 168.38. Finally, let's not overlook the shares of Allstate Corp (NYSE: ALL), which rose by 5.85% and closed at 111.98.

On the other hand, the leaders of decline were the shares of Discover Financial Services (NYSE: DFS), which decreased in price by 15.92%, closing at 102.45. Tesla's shares (TSLA.O) fell by 9.74%, marking the largest one-day percentage decline since April 20, after the electric vehicle manufacturer reported a drop in second-quarter gross profit to a four-year low, and CEO Elon Musk hinted at further price cuts. The quotes of Equifax Inc (NYSE: EFX) also dropped by 8.89% to 216.37.

Among the components of the NASDAQ Composite index, the growth leaders in today's trading were the shares of Guardforce AI Co Ltd (NASDAQ: GFAI), which increased by 57.46% to 6.44, Evelo Biosciences Inc (NASDAQ: EVLO), gaining 52.40% and closing at 9.86, and Sirius XM Holding Inc (NASDAQ: SIRI), rising by 42.26% and finishing the session at 7.81.

Despite the mixed trends, some stocks stand out with their extraordinary dynamics.

Shares of Discover Financial Services (NYSE: DFS) faced challenges this time around and fell a hefty 15.92% to close at 102.45.

Similarly, the shares of Tesla (TSLA.O) also attracted attention with a loss of 9.74%. This marked the largest one-day percentage decline since April 20. The drop was attributed to the announcement of a decline in gross profit in the second quarter to a four-year low, as well as hints from CEO Elon Musk about possible price reductions.

Meanwhile, the shares of Equifax Inc (NYSE: EFX) also experienced a decline, dropping by 8.89% to 216.37.

However, not only the decline is noteworthy in the market. Among the components of the NASDAQ Composite index, some stocks stand out as strong growth leaders. For example, the shares of Guardforce AI Co Ltd (NASDAQ: GFAI) astonished with a surge of 57.46%, reaching 6.44. They were followed by the shares of Evelo Biosciences Inc (NASDAQ: EVLO), which rose by 52.40% and closed at 9.86, and the shares of Sirius XM Holding Inc (NASDAQ: SIRI), showing growth of 42.26% and finishing the session at 7.81.

On the other hand, the shares of Vir Biotechnology Inc (NASDAQ: VIR) drew attention with a significant price drop of 44.90%, closing at 12.70. The shares of Netcapital Inc (NASDAQ: NCPL) also experienced a decline of 41.88%, ending the session at 0.68. Additionally, the quotes of Durect Corporation (NASDAQ: DRRX) also suffered a decrease of 33.13%, reaching 3.29.

It is interesting to note that Netflix (NFLX.O) shares faced a major challenge, falling 8.41%.

This marked the largest one-day percentage decline since December 15, and it happened after the company's quarterly revenue in the streaming video sector did not meet market expectations.

Despite the decline in the Nasdaq index, the Dow (.DJI) continues to delight investors with its steady performance. It registered its ninth consecutive session of growth, making it the longest winning streak since September 2017.

The situation on the New York Stock Exchange also left its mark. The number of declining stocks (1710) exceeded the number of those closing in the positive (1240), and 80 stocks remained virtually unchanged. The Nasdaq stock exchange also experienced fluctuations: shares of 2246 companies declined, 1286 rose, and 131 remained at the same level as the previous closing.

The stock market is showing an increase in volatility, reflecting the instability and fluctuations in the market. The CBOE Volatility Index, which is based on S&P 500 options trading, rose by 1.67% and reached a level of 13.99. This indicates that investors are expecting increased uncertainty and more unpredictable movements in the near future.

Currently, there are mixed trends in the commodity market. August gold futures lost 0.45% or $9.00, closing at $1,000 per troy ounce. Meanwhile, September WTI crude oil futures rose by 0.61% or $0.46, reaching $75.75 per barrel. September Brent crude oil futures also showed an increase of 0.29% or $0.23, reaching $79.69 per barrel.

In the currency market, the EUR/USD pair is experiencing a decline of 0.61%, leading to a drop to 1.11. At the same time, USD/JPY quotes rose by 0.29% and reached 140.07. USD index futures also demonstrated growth by 0.56%, settling at 100.54. This indicates a strong position of the US dollar in the market and investors' interest in this currency.

Thus, the current data in the market speaks of unpredictability and warns investors to be more attentive and cautious when making decisions. In such a situation, it is especially important to keep track of global events and economic news to make informed decisions in the market.

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Trading Signal for GOLD (XAU/USD) for July 25-26, 2023: buy if breaks $1,963 (200 EMA - 21 SMA)

Early in the European session, gold (XAU/USD) is trading at 1,962.61. It is located above the 21 SMA and above the 200 EMA.

The 1-hour chart shows that gold is trading within a downtrend channel formed since July 20 when it reached the high of 1,987.

With a sharp break of this downtrend channel and a daily close above 1,963, we can expect the price to rally and reach 3/8 Murray, so its first target is seen at about 1,968. If bullish force prevails, the metal could reach 1,985 and ultimately the psychological level of $2,000.

On the other hand, in case XAU/USD falls below 1,960, we could expect a downward acceleration and the instrument could reach 1,953 and finally, it could fall to 1,943, a level that coincides with the 200 EMA on the 4-hour chart.

Investors are waiting for the FED to increase its interest rate by 0.25% to 5.50%. The policy announcement could generate strong volatility in gold. If the data is favorable, gold could fall until it reaches 1,937 and 1,906.

On July 24, the Eagle indicator reached a 5-point low, which represents an oversold zone. Since then, we can observe a technical rebound in gold from the 1,953 low. In the next few hours, we expect gold to break sharply the downtrend channel and reach 1,968 and 1,985.

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The global recession is getting closer. USD, EUR, GBP overview

CFTC data reflects a significant deterioration in sentiment towards the US dollar. The overall short position on the USD increased by 7.39 billion during the reporting week, reaching -19.88 billion, marking the largest weekly change since 2020, and the highest bearish bias since 2021.

Significant adjustments were observed in positions on the euro and yen. In addition, it is worth noting that the net long position on gold increased by a substantial 6.231 billion, reaching 38.258 billion. Buying gold while simultaneously selling the dollar often signifies expectations that the dollar will weaken.

The Federal Reserve's rate hike on Wednesday is considered a done deal, and the market's primary focus will be on the forecasts. The Fed's main goal is to lower inflation expectations and reduce demand, so far this goal has not been achieved. Retail sales data for June indicates high consumer activity, suggesting a potential threat to the sustainability of core inflation.

The prospects for the dollar remain unclear for now. Either tightening financial conditions will lead to a sharp decline in consumption, creating conditions for a recession, or the transition will be more gradual. In the first case, the dollar will weaken, while in the second, any corrective decline may be short-lived, as the eurozone economy is closer to a recession than the US economy.

EUR/USD:
The European Central Bank meeting will take place on Thursday, and a 25 bps rate hike is considered a done deal, as Council members have repeatedly communicated in their comments. The rate hike itself is unlikely to cause a significant movement.

The main focus will be on the forecasts, from which the market will obtain information about the plans for the September meeting - either the central bank signals another rate hike, or it decides to take a pause. These post-meeting data will be the factor that either pushes the euro higher or fuels the corrective decline.

The eurozone economy is slowing down, and the PMI data published on Monday came out worse than expected in all sectors - both in manufacturing and services. The slowdown in activity suggests that inflation deceleration will continue, and the September meeting will be the last one where the ECB raises rates. If the market confirms this assumption, the euro will fall, and the uptrend will come to an end.

The net long position on the euro increased by 5.8 billion during the reporting week, marking the most significant improvement in sentiment towards the euro since September of last year. The calculated price has yet to move up.

Investors seem to be anticipating the end of the Fed's rate hike cycle, as well as the US dollar's bullish momentum. The FOMC meeting will take place on Wednesday, and the expected rate hike is already fully priced in. As a result, the yield spread will start to favor the euro, as the ECB is still far from the end of its rate cycle. It is assumed that the end of the Fed's tightening cycle will be accompanied by hawkish comments, which could push EUR/USD to fall towards the support level at 1.1010/20. Considering the significant change in sentiment on futures after the formation of a local base, the euro will likely attempt to bring back its upward movement.

GBP/USD:
The retail sales data for June came out better than expected, supporting the pound as maintaining high consumer demand also implies the preservation of high inflation expectations and, consequently, an increase in the Bank of England's rate forecasts.

At the same time, business activity is slowing down faster than expected - the manufacturing PMI fell from 46.5 to 45 in July, while the services PMI fell from 53.7 to 51.5. The composite PMI also slowed down from 52.8 to 50.7. Considering that GDP growth is minimal and the UK economy is half a step away from a recession, maintaining high consumption while PMI activity declines implies a transition to a stagflation regime, which combines high inflation and recession. This is an awful scenario for the BoE, which they would like to avoid.

Inflation in the UK is higher than in the eurozone and the US, which suggests further rate hikes by the BoE even before the threat of a recession. This factor will support demand for the pound in the short term.

The net long position on GBP increased by 499 million during the reporting week, reaching 5.192 billion, reflecting bullish positioning. The calculated price is currently pointing downwards, which suggests an attempt to develop a corrective decline.

The pound has fallen below the support level at 1.2847, which technically indicates the possibility of a downward movement. The next support is at 1.2770/90, where the lower band of the long-term bullish channel lies. Considering that speculative positioning in futures is shifting in favor of the pound, we assume that the bearish attempts are of a corrective nature, and the pound is unlikely to fall below 1.2770. After forming a local peak, we expect the pair to resume its uptrend.

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US dollar comes on top as euro lags behind

The American currency has once again taken the lead, pushing the European currency to the sidelines. The dollar was boosted by strong US consumer confidence data. Meanwhile, the euro has experienced a significant decline remains hopeful of a rebound in the near future.

On the evening of Tuesday, July 25th, the greenback demonstrated significant growth against the euro, soaring higher after the release of encouraging consumer confidence data in the USA. According to latest reports, the consumer confidence index in the US increased to a 2-year high of 117 points in July, up from the revised 110.1 points in June.

Against this backdrop, the US Dollar Index (USDX) performed well, reaching a peak of 101.65 points but later dipped slightly by 0.08%. It's worth noting that USDX exhibited a consistent uptrend over six consecutive trading sessions, nearly recouping 50% of its losses from early July. According to Sean Osborne, a leading currency strategist at Scotiabank, the prospects for the US dollar remain uncertain: "While the DXY rebound has extended a bit more than I expected the broader outlook for the USD remains somewhat challenging and I still rather look for the USD to weaken in H2," he commented.

Nevertheless, the euro, the recent market favorite, was unable to take advantage of the dollar's moves and suffered a noticeable setback against it. However, most of the G10 currencies strengthened against the American currency, particularly the Australian dollar, the Swiss franc, and the Japanese yen.

The unexpected driving force behind the surge of major currencies against the greenback was the optimism regarding the prospects of the Chinese economy. Recently, Chinese authorities outlined revised plans for additional economic support, extending their backing to troubled sectors such as the real estate market, while pledging to boost consumption and address regional government debts.

Analysts argue that this newfound Chinese optimism weighed down on the dollar, which is now bearing the burden of China-inspired optimistic sentiment against its major G10 peers. As a result, the US dollar index retreated from its two-week highs after being previously supported by elevated PMI data. Furthermore, market participants' uncertainty about the Federal Reserve's forthcoming actions contributed to the dollar's decline.

Investors and traders expect that on Wednesday, July 26th, the Federal Reserve will raise its key interest rate, marking the final move in the current tightening cycle. According to analysts, the monetary authorities will maintain the possibility of further maneuvers in the future, in case a return to tightening is deemed necessary. However, there are risks involved. "Policymakers will want to leave the door open to more tightening down the road but history shows markets are quite attuned to the top of the rate cycle when it comes and USD has generally weakened once peak rates are in," analysts at Scotiabank warned.

In this complex situation, the euro finds it challenging to stay afloat. EUR has demonstrated weakness after the publication of Eurozone economic data. According to reports from the German research institute IFO, key indicators, namely the EU Business Climate Index and the Current Assessment Index, came in worse than previously forecast. In July, the business climate index in Germany dropped to 87.3 points from the previous 88.6 points, falling short of market expectations of 88 points.

This ambiguous situation has negatively impacted EUR/USD. After rising to 1.1100, the pair reversed course and fell to the lowest level in two weeks around 1.1050. On Wednesday morning, July 26th, EUR/USD was trading between 1.1058 and 1.1059, gradually attempting to break free from the downward spiral.

According to analysts, currently EUR/USD lacks momentum for growth, despite the rebound from the two-week low. The pair benefitted from the US dollar's short term retreat, but failed to attract bulls due to concerns about a recession in the Eurozone.

The market's focus is now on policy meetings of central banks around the world, which are taking place this week. On Wednesday, July 26th, the Fed will announce the policy decision following the July meeting. The overwhelming majority of analysts expect the Fed funds rate to be hiked by 25 basis points to 5.25% - 5.5%.

On Thursday, July 27th, the European Central Bank (ECB) will hold its meeting. Later, the ECB will publish its decision, which analysts also believe will lead to a 25 basis point rate hike to 4.25%.

If the ECB's rhetoric turns out to be less hawkish than that of the Fed, EUR/USD may fall below the key psychological level of 1.1000. However, analysts still consider 1.1050 as the key support level.

Additionally, on Thursday, the US will publish its first estimate of GDP growth for Q2 2023. Preliminary data indicate the American economy grew by 1.8% year-on-year during this period, following a 2% increase in Q1. Despite this, market participants remain primarily focused on the Federal Reserve and ECB meetings, their monetary policies, and the hints provided by the central bank heads regarding future actions.

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EUR/USD: euro holds ground despite stronger dollar

The US dollar started the day on a positive note, attempting once again to overtake its European counterpart. However, the euro is not giving up so easily and continues to fight for leadership in the EUR/USD pair. At the beginning of this week, the greenback retreated slightly, but quickly made up for its early losses.

According to analysts, the dollar's recent failures were temporary and were not able to drag the currency into negative territory. Neither the recent downgrade of the US credit rating nor the unstable macroeconomic data published by the US Department of Labor managed to undermine the greenback's position. In July, the US job market added 187,000 new jobs, following the 185,000 previously recorded. Although these figures fell short of the anticipated 205,000, experts assessed the overall macroeconomic outlook as positive.

Analysts often say that the Nonfarm Payroll (NFP) is one of the most unpredictable indicators. This is why any dramatic shifts in the market or any reviews of the Fed's current decision were highly unlikely. According to Austan D. Goolsbee, head of the Chicago Fed, the American job market should "find its balance" soon. The official had previously remarked that while the US labor market is cooling down, it's "still exceptionally hot."

According to estimates, overall employment growth in the US was slightly below expectations. However, the increase in wages and the decrease in unemployment rates might provide reasons for the Fed to consider another rate hike. The return of the unemployment rate to 3.5% is particularly noteworthy. Analysts believe this rate is now at cyclical lows, which continues to exert inflationary pressure. In this context, the Federal Reserve may find it hard to soften its stance, experts believe.

In addition to this, hourly wages grew more than expected (by 0.4% MoM) over the reporting period, maintaining an annual rate of 4.4% set earlier this year. With such wage growth, rates and employment figures, inflation is unlikely to ease. In the current scenario, the Fed might further tighten its monetary policy.

This sentiment is shared by Atlanta Fed President Raphael Bostic. Last Friday, August 4, he told Bloomberg that the central bank would maintain its restrictive monetary policy until 2024. This is crucial to achieve a target rate of 2%, the official reiterated.

Against this backdrop, the dollar has noticeably appreciated against other major currencies, primarily the yen and the euro. The greenback's strengthening was driven by the latest import and export reports from China. Official data indicates that from January to July, exports from China decreased by 5%, while imports fell by 7.6% year-on-year. Additionally, last month both indicators plunged by 14.5% and 12.4% respectively.

At the start of the week, the greenback managed to stabilize after a moment of weakness. On Tuesday morning, August 8, the EUR/USD pair was trading near 1.0997 before rising quickly to 1.1000 and breaking through it. EUR/USD is expected to hit new record highs and its next target is believed to be the 1.1100 mark.

Today, the market's focus is on significant macroeconomic data from the United States, with analysts expecting a noticeable decrease in inflation in the short term. On Thursday, August 10, the country's Department of Labor will publish these reports. According to preliminary forecasts, consumer prices in America surged by 3.3% year-over-year in July.

The data on US consumer prices will help investors assess the results of the Federal Reserve's prolonged cycle of monetary policy tightening. In addition, inflation is projected to have accelerated over the past month.

Current macro statistics will help forecast the Federal Reserve's next step and partly predict its actions at the September meeting. Meanwhile, the majority of analysts (86.5%) believe that the regulator will maintain the key rate at the current level of 5.25%-5.5%. Other experts assume there might be a slight increase.

Last week, tensions escalated in the global stock market after the deterioration of the American credit rating. Against this backdrop, market participants were seriously afraid of widespread sell-offs, but this did not happen. Moreover, the market managed to avoid the correction that many feared after a 7-month period of growth. As a result, the market found relative stability as traders and investors did not rush to lock in profits and sell securities in their portfolios.

Fitch's recent decision has not negatively affected the US currency rate. According to analysts' observations, the US dollar index (DXY) closed last week with gains, showing a short-term dip. Earlier, in August 2011, S&P Global Ratings downgraded the US credit rating amid problems with the debt ceiling. However, these actions also barely affected the national currency. Moreover, the dollar index closed 2021 with a 7% growth, and during that time, it added over 30%.

According to analysts, in the medium and long-term planning horizons, the greenback will maintain stability. A more positive scenario implies a sustained upward trend of the US dollar against the euro. According to Jane Foley, Head of Currency Market at Rabobank, the dollar is still considered a safe-haven currency "thanks to its massive share in international payments." The currency strategist at Rabobank acknowledges that the greenback may lose its dominant positions over time "but it is unlikely to happen in the next 20, 30, or 40 years."

Many specialists assume that the trajectory of the American currency will largely depend on the Federal Reserve's monetary policy. Besides, USD will continue to gain support thanks to the confident growth of the US economy.

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The global economy is slowing down, risk appetite is decreasing, and the USS is experiencing increased demand. Overview of USD, CAD, JPY

Activity in the currency market remains subdued in the absence of significant economic reports, with the main focus on the US inflation report on Thursday, which could lead to more pronounced movements.

Risk assets are still under pressure due to weak data from China, indicating a decline in global demand. Following Tuesday's disappointing external trade data, it was revealed that China's economy has slipped into deflation, with inflation turning negative at -0.3% YoY in July. Consumer prices rarely decrease in China, and given that other countries continue to grapple with high inflation, this is a worrying sign for the global economy as a whole.

The US dollar remains the leader in the currency market, playing the role of the primary safe-haven currency in the current conditions.

USD/CAD
The Canadian dollar has received several sensitive blows and lost its positive momentum against the USD. The labor market report for July showed a decrease in the number of new jobs (-6.4K), while an increase of 21.1K was forecasted, which is particularly noticeable against the backdrop of strong growth in June (+59.9K).

The unemployment rate rose from 5.4% to 5.5%, and more importantly, the average wage growth increased from 3.9% YoY to 5% YoY. Wage growth is usually a bullish factor as it fuels high inflation, but with simultaneous economic slowdown, this factor begins to work against it.

The Ivey Purchasing Managers Index (PMI) for July dipped into contraction territory, hitting a multi-month low of 48.6 points. This indicates an economic slowdown. However, the price sub-index rose to a 5-month high, increasing from 60.6 points to 65.1 points.

The Canadian economy has suddenly lost the advantage that allowed for expectations of sustainable CAD growth. Inflation remains strong, and to contain it, it is logical to anticipate further actions by the Bank of Canada. These expectations are in favor of CAD strengthening. However, simultaneously, a slowdown in activity with further tightening of monetary policy could lead Canada's economy into a recession. This, on the contrary, limits the resolve of the Bank of Canada.

The unstable equilibrium deprives the Canadian currency of its advantage, weakening the bullish momentum.

The net long position on CAD has increased slightly over the reporting week, with positioning being neutral. However, the calculated price after the release of the disappointing employment report turned upwards and moved above the long-term average.

The sharp upward turn in the calculated price reduces the chances of a confident resumption of USD/CAD decline. Currently, the pair is trading near the middle of a corrective bearish channel. If no additional arguments arise from the Canadian side, the likelihood of further growth will remain high. The long-term target is the upper band of the channel at 1.3690/3720, with support at 1.3350/70.

USD/JPY
The key question that will determine the fate of the Japanese yen remains how resolutely the Bank of Japan is prepared to act in order to reduce domestic inflation. Alternatively, the Bank might continue adopting a wait-and-see position, resorting to adjustments to the current monetary policy.

Possible hawkish steps by the BOJ involve two potential actions - either a complete abandonment of the yield curve control (YCC) policy or a withdrawal from negative interest rates. Any actions in this direction will be interpreted by the market as a hawkish signal, leading to yen strengthening. Conversely, maintaining the current policy will inevitably contribute to further yen weakening.

The recent comments from BOJ officials after the July 28 meeting are cautious and do not provide grounds to expect any decisive steps. For example, BOJ Deputy Chief Uchida Shinichi stated at a press conference that the Bank is "considering an exit from monetary easing but does not see reasons for any actions in the foreseeable future," and that the decision is still "far off."

In other words, the "wait and see" policy remains in place. The yen can start to strengthen under current conditions only if negative trends in the global economy intensify, leading to a noticeable increase in demand for safe-haven assets. As long as there is no reason for such a scenario, there is no reason for yen strengthening.

The net short position on the yen has slightly increased over the reporting week and solidified just above -7 billion, speculative positioning is confidently bearish. The calculated price is above the long-term average and aimed at continuation of growth.

The development of the upward movement for USD/JPY is still the main scenario, despite attempts at consolidation near the 143 level. A week ago, we identified the local high at 145.06 as the target for bullish momentum development and the upper band of the channel at 147.30/70 as the long-term target. These targets remain relevant and can only be adjusted in case of truly significant changes from the BOJ in its monetary policy. As long as changes are cosmetic, the dollar is objectively stronger in this pair.

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EUR/USD. Weekly preview. US retail sales, Fed minutes, ZEW indices

Over the course of the first two weeks of August, the EUR/USD pair has failed to establish a clear direction. Despite prevailing bearish sentiments, sellers have been unable to solidify their position at the base of the 9th figure, let alone breach the support level at 1.0870. All of this indicates that the bears are hesitant, who are eager to lock in profits as soon as the price dips below the 1.0950 level (the middle line of the Bollinger Bands indicator on the weekly chart). The significant events of the previous week, like China's foreign trade data, the downgrade of American banks' ratings by Moody's, and the US inflation reports, led to a certain level of volatility. However, once again, the price remained within the confines of the 9th figure, with a brief impulsive surge to 1.1062. The pair completed a circle and returned to it's previous positions.

The economic calendar for the upcoming trading week is relatively modest, although not entirely devoid of events. Let's review the main highlights of the next five days.

Monday - Tuesday
At the start of the trading week, the pair is likely to trade with the momentum of Friday. Monday's economic calendar is almost empty, with perhaps the German Wholesale Price Index being of interest. This indicator is expected to show a positive trend, but will still remain in the negative territory, both on a yearly basis (-2.6%) and on a monthly basis (-0.1%).

The main release on Tuesday is the US Retail Sales report. Positive dynamics are anticipated here. According to forecasts, retail sales volume in the US is expected to increase by 0.4% in July, following a 0.2% growth in June. Excluding auto sales, the indicator is also projected to rise by 0.4%. Additionally, the Empire State Manufacturing Index, which is based on a survey of manufacturers in the New York Federal Reserve District, will be released on Tuesday. Here, on the contrary, negative dynamics are expected, with the indicator predicted to decline to -0.3.

Furthermore, on Tuesday, Neel Kashkari, the President of the Federal Reserve Bank of Minneapolis, will be speaking. He could potentially generate increased volatility among the dollar pairs. Firstly, he holds voting rights in the Committee this year. Secondly, Kashkari has already commented on recent inflation releases, and his tone was rather positive. According to him, the US central bank has made "good progress" in combating inflation. If he voices similar rhetoric next week, the dollar might come under pressure again.

During the European session on Tuesday, traders should pay attention to the German ZEW Economic Sentiment indices. In particular, the business sentiment index for Germany in August is expected to remain at the July level of -12 points. The business expectations index is expected to deteriorate to -15 points (the worst reading since December 2022). The current situation index is also projected to worsen to -63 points (the lowest reading since November of the previous year).

Wednesday
On Wednesday, EUR/USD traders will focus on the minutes of the July Federal Reserve meeting. Recall that the outcomes of the July meeting did not favor the US dollar. Among all the possible scenarios, the Fed implemented perhaps the most dovish one. The US central bank tied the fate of the interest rate to the dynamics of key macroeconomic indicators. The central bank retained the key formulations of the accompanying statement in their previous form, and Fed Chairman Jerome Powell, during the final press conference, indicated that the September Fed meeting could end with either another rate hike or keeping it unchanged. He emphasized that the central bank in the fall will evaluate the entire set of macroeconomic data "with special emphasis on progress in the field of inflation." The Fed's indecisive stance was interpreted against the US dollar.

A hawkish tone in the minutes of the July meeting could provide support to the US dollar, especially since this meeting took place before the release of US inflation data for July. However, in my opinion, the document will likely reflect the Fed members' hesitant stance, considering the corresponding formulations in the final communique.

In addition, on Wednesday, the report on the volume of building permits issued in the US will be released (expected growth of 1.1%), as well as the industrial production report (also expected to grow by 0.3%, following two months of negative dynamics).

Thursday
On Thursday, traders should focus on the Philadelphia Federal Reserve's Manufacturing Index. The indicator has been in the negative zone since September 2022. According to forecasts, in August, the index will also remain below the "waterline" but will demonstrate positive dynamics, rising to the level of -9.8 points.

Furthermore, on Thursday, traders could also pay attention to the Initial Jobless Claims data in the US. Over the past two weeks, this indicator has been rising, and according to forecasts, this trend will continue: next week, the number of claims is expected to increase by 250,000 (last week - 248,000, the week before last - 227,000).

Friday
The economic calendar for the final trading day of the week is not packed with events for the EUR/USD pair. The only thing of interest is the eurozone inflation data for July. We will learn the final assessment of July's Consumer Price Index (CPI), which, according to forecasts, should match the initial assessment (a decrease in the Consumer Price Index and an increase to 5.5% in the core CPI).

Conclusions
The EUR/USD pair is in a hanging state. In order to develop a downtrend, sellers need more than just to establish themselves at the base of the 9th figure – they need to overcome the support level of 1.0870 – at this price point, the lower line of the Bollinger Bands indicator on the daily chart coincides with the upper and lower bands of the Kumo cloud. If the bears break through this price barrier, the Ichimoku indicator will form a bearish "Parade of Lines" signal, indicating the strength of the downward movement. This is not an easy task, considering the fact that over the last two weeks, the downward momentum has faded at the base of the 9th figure.

The bulls don't have an easy task either: they need to establish themselves above the 1.1050 mark – this is the upper line of the Bollinger Bands, coinciding with the Kijun-sen line on the same timeframe. In that case, the pair can move towards the 11th figure. However, throughout August, buyers only impulsively tested the 1.1050 target, afterwards they retreated, locking in profits. Given the relatively uneventful economic calendar for the upcoming week, we can assume that the pair will continue to trade within the range of 1.0950 – 1.1050, with periodic attempts to establish themselves at the base of the 9th figure.

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Growth in yields and stable inflation suggest further rate hikes. USD, EUR, GBP Review

The net short position in USD grew by $490 million to -$16.272 billion over the reporting week after a strong correction a week earlier. The decline is largely related to long positions on the euro, and in terms of other major currencies, the notable trend is selling across all significant commodity currencies (Canadian, Australian, New Zealand dollars, and also the Mexican peso). The yen and franc are slightly doing better, i.e., there is demand for safe-haven currencies and a sell-off in commodity currencies. Since long positions in gold have decreased by $4.5 billion, we can expect increasing demand for the US dollar.

PMIs for the eurozone, the UK, and the US will be published on Wednesday, which can significantly influence the rate forecasts of the European Central Bank, the Bank of England, and the Federal Reserve. Last week, we witnessed a clear uptrend in bond yields, suggesting increased demand for risk amid more upbeat economic reports. At the same time, we see a sharp deterioration in China's economy, which, on the contrary, points to slowing demand. This dilemma may be resolved after the release of the PMIs, so we can expect increased volatility.

EUR/USD
The final estimate confirmed that the euro area annual inflation rate was 5.3% in July 2023, with core inflation unchanged at 5.5%. Since there are no seasonal factors that could explain the price increase at the moment, it would be best to assume the most obvious explanation - price growth is supported by broad price pressures in the growing services sector.

Stubborn inflation supports market expectations that the ECB will raise rates in September, and this increase is already reflected in current prices. The strong labor market is also in favor of a rate hike.

After a sharp decrease a week earlier, the net long position in the euro grew by $1.275 billion, putting the bearish trend into question. The settlement price is below the long-term average, giving grounds to expect a continuation of the euro's decline, but the momentum has noticeably weakened.

A week earlier, we assumed that the bearish trend would continue. Indeed, the euro consistently passed two support levels, but did not reach the 1.0830 level. The resistance at 1.0960, which the euro can reach if a correction develops, is still considered in the long term. We assume that the trend remains bearish, and the 1.0830 level will be tested in the short term.

GBP/USD
Inflation in July fell from 7.9% to 6.8%. This is mostly due to the fall in the marginal price of OFGEM (Office of Gas and Electricity Markets) from 2500 pounds to 2074. Without this decline, inflation would have still fallen, but much less - to 7.3%.

Despite the sharp decline, inflation remains at a very high level, and further falls in the marginal price of energy carriers are unlikely. The NIESR Institute suggests that, among the possible scenarios for future inflation behavior, we should choose between "very high", assuming an average annual inflation of around 5% over 12 months, and "high persistence", which is equivalent to an annual level of 7.4%. Needless to say, both scenarios imply inflation higher than in the US, so the likelihood of a higher BoE rate remains, leading to a yield spread in favor of the pound.

These considerations do not allow the pound to fall and support it against the dollar, while against most major currencies, the dollar continues to grow.

After three weeks of decline, the long position in GBP grew by $302 million to $4.049 billion. Positioning is bullish, the price is still below the long-term average, but, as in the case of the euro, an upward reversal is emerging.

In the previous review, we assumed that the pound would continue to decline, but UK inflation pressure remains stubborn, which changed the rate forecast and supported the pound. A correction may develop, and the nearest resistance level is 1.2813. If the pound goes higher, the long-term forecast will be revised. At the same time, we still consider the bearish trend, and the chances of restoring growth are high, with the nearest target being the support area of 1.2590/2620.

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The most interesting events this week

The previous trading week was filled with important events and reports. When looking at the range and movements of both instruments, one might wonder: why was it so subdued? It was reasonable to expect stronger movements and market reactions. To briefly recap, key reports from the United States turned out weaker than market expectations. Even the stronger ones left a peculiar impression. GDP grew by 2.1% in the second quarter, not the expected 2.4%. The ADP report showed fewer new jobs than expected. Nonfarm Payrolls reported more jobs, but the previous month's figure was revised downward. The ISM Manufacturing Index increased but remained below the 50.0 mark. The unemployment rate rose to 3.8%, which few had anticipated.

Based on all these reports, one might have assumed that it was time to build a corrective upward wave, but on Thursday and Friday, the market raised demand for the US dollar, so both instruments ended the week near their recent lows. So what can we expect this week?

On Monday, the most interesting event will be European Central Bank President Christine Lagarde's speech.

On Tuesday, another speech by Lagarde, as well as Services PMIs of the European Union, Germany, and the United Kingdom. We can also expect speeches by other members of the ECB Governing Council. I advise you to monitor the information related to Lagarde's speeches. If she softens her stance, it can have a negative impact on the euro's positions.

Wednesday will begin with a report on retail trade in the EU and end with the US ISM Services PMI. We can consider the ISM report as the main item of the week, although the ISM Manufacturing PMI that was released on Friday did not stir much market reaction. It is likely that the index will remain above the 52.7 mark, which is unlikely to trigger a market reaction.

On Thursday, you should pay attention to the final estimate of GDP in the second quarter for the European Union. If it comes in below 0.3% quarter-on-quarter, the market may reduce demand for the euro. The US will release its weekly report on initial jobless claims. On Friday, Germany will publish its inflation report for August, and that's about it. There are hardly any important events and reports this week.

Based on the conducted analysis, I came to the conclusion that the upward wave pattern is complete. I still believe that targets in the 1.0500-1.0600 range are feasible, and I recommend selling the instrument with these targets in mind. I will continue to sell the instrument with targets located near the levels of 1.0637 and 1.0483. A successful attempt to break through the 1.0788 level will indicate the market's readiness to sell further, and then we can expect the aforementioned targets, which I have been talking about for several weeks and months.

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The euro could be heading down for a long time

The euro kicked off the new week with some negative traction. In previous articles, I've already drawn your attention to the statements of some members of the European Central Bank's Governing Council, which boiled down to a simple idea – the hawkish rhetoric is fading, and the ECB is preparing to conclude the process of tightening monetary policy. Thus, the decrease in demand for the euro is quite natural.

On Monday, ECB President Christine Lagarde refused to answer questions about the rate at the September meeting. Some of her colleagues actively hinted that rates should be kept at peak levels for as long as possible but didn't mention new rate hikes. On Wednesday, Peter Kazimir said that interest rates could rise by another 25 basis points. This could happen as early as next week, although a pause in September with a subsequent increase in October or December is also possible.

In my opinion, it doesn't matter when exactly the ECB will raise rates for the last time. The key point is that until the tightening process is complete, there is at most one more hike. Right now, it's not even important how high inflation is in the European Union and how quickly it is decreasing because rates have been the priority for the market over the past year. Since the ECB may raise rates for the last time and the Federal Reserve may raise rates for the last time, it may seem that the euro and the dollar are in similar conditions. However, this is not the case. First, the sentiment suggests a decline. Second, the US currency has been falling for quite a while, and during this period, the Fed has been more aggressive than the ECB. This implies that the euro is a bit more expensive than it should be. I believe that most factors currently favor further depreciation.

I would also like to note another statement from another member of the ECB's Governing Council, Francois Villeroy de Galhau, who stated that interest rates are near their peak, echoing Kazimir's rhetoric. Villeroy also noted that there is currently no recession, and inflation will not slow down to 2% until at least 2025. This implies that the central bank will not further tighten its policy to avoid causing a recession in the European economy, and they can afford to wait on inflation.

Based on the conducted analysis, I came to the conclusion that the upward wave pattern is complete. I still believe that targets in the 1.0500-1.0600 range are quite feasible. Therefore, I will continue to sell the instrument with targets located near the levels of 1.0636 and 1.0483. A successful attempt to break through the 1.0788 level will indicate the market's readiness to sell further, and then we can expect to reach the targets I've been discussing for several weeks and months.

The wave pattern of the GBP/USD pair suggests a decline within the downtrend. There is a risk of completing the current downward wave if it is d, and not wave 1. In this case, the construction of wave 5 might begin from the current marks. But in my opinion, we are currently witnessing the construction of the first wave of a new segment. Therefore, the most that we can expect from this is the construction of wave "2" or "b". I still recommend selling with targets located near the level of 1.2442, which corresponds to 100.0% according to Fibonacci.

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Trading Signal for GOLD (XAU/USD) on September 12-13, 2023: buy above $1,919 (3/8 Murray - 21 SMA)

Early in the European session, gold (XAU/USD) is trading around 1,923.19, above the 3/8 Murray, and above the 21 SMA. On the 4-hour chart, we see that gold is consolidating within a bullish trend channel formed since August 6.

If theinstrument remains above 1,919 in the next few hours, we could expect it to continue rising and the price could reach the top of this channel around 1,930.

According to the 4-hour chart, the bears are gaining strength in the short term, but overall, XAU/USD remains consolidated around 1,920 - 1,930. XAU/USD is above the daily pivot point which gives it a positive outlook. The key level is 1,923, above which gold is expected to continue rising to 1,930 and up to 1,953 (5/8 Murray).

In case gold trades below 1,919, a bearish acceleration is expected to occur, but for this, we should wait for confirmation below 1,915, which could be seen as a signal to sell with the first target of 2/8 Murray at 1,906. The price could even reach the psychological level of 1,900.

Meanwhile, gold might produce a positive signal if it manages to settle above 1,920. Then, there will be an opportunity to buy with targets at 1,930, 1,937, and 1,953.

The eagle indicator is giving a positive signal. However, if the gold price falls below 1,915, we should avoid buying. If this scenario does not occur at the current price levels, we could buy with the target at 1,953 in the short term.

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EUR/USD: The euro falls after hawkish ECB surprise

The European Central Bank surprised market participants by raising interest rates by 25 basis points. We must pay tribute to the ECB – it hasn't forgotten how to surprise! Although such unexpected moves, typical of, say, the Reserve Bank of New Zealand, are not characteristic of the ECB – they indicate a weak level of communication. Some hints of hawkishness were heard from certain representatives of the Bank (for example, Klaas Knot suggested not underestimating the potential for a hawkish scenario), but overall, the market was largely expecting a different outcome. The probability of maintaining the status quo was estimated at around 60-70%, and this confidence was also shaped by cautious/dovish statements from ECB members. Weak PMIs, ZEW, IFO, a contradictory report on inflation growth in the eurozone, weak retail sales, a decline in industrial output, and a slowdown in the Chinese economy – all these factors also spoke in favor of a wait-and-see stance. Therefore, the ECB's decision is one that goes "against the grain."

However, the determination (in the current circumstances, it can even be called boldness) of ECB members did not help the single currency. Ironically, the unexpected hawkish surprise from the ECB sent EUR/USD plunging. Reacting to the results of the September meeting, the pair hit nearly a 4-month low, marking it at 1.0650 (the lower Bollinger Bands line on the daily chart).

So, what is the reason for such an anomalous market reaction at first glance? The devil, as always, is in the details. The ECB raised interest rates by 25 bps with one hand but effectively put an end to the current cycle of monetary policy tightening with the other. The central bank signaled that interest rates have "reached a level that will make a substantial contribution to containing inflation." Such wording is difficult to interpret, so EUR/USD traders viewed the ECB's decision as the "final chord" of the current cycle.

Interestingly, ECB President Christine Lagarde tried to soften the message during the final press conference, stating that "it is not possible to definitively say that ECB rates have reached their peak at this time." However, judging by the EUR/USD reaction, market participants have already drawn conclusions about the prospects for further monetary tightening.

It is important to note again that most ECB officials were cautious or dovish in the run-up to the September meeting, pointing out signs of economic slowdown (especially after the release of PMIs), cooling labor markets, slowing inflation (particularly core HICP), and a slowdown in bank lending. Thus, they hinted at the need to maintain the status quo. However, after the September meeting, it became clear that inflation, which is still at a high level, worries ECB officials more than the deteriorating economic outlook.

The latest inflation report reflected the "stubbornness" of European inflation. The Consumer Price Index remained unchanged at 5.3% in August (against expectations of a decline to 5.1%). This gauge has been steadily declining since October 2022, moving from its peak of 10.6% to the current target of 5.3%. However, the downtrend has recently stalled. As for core inflation, the situation is somewhat different. Core HICP, excluding energy and food prices, rose actively until March, reaching 5.7%. Then, the gauge gradually lost momentum but remained within a range: it was at 5.3% in May, 5.5% in June and July, and finally, in August, the index returned to 5.3%.

This report was published two weeks ago on August 31st. Since then, discussions in the expert community about the ECB's future actions have not subsided. After a series of disappointing economic reports (as listed above), hawkish expectations diminished, and the balance tipped in favor of a wait-and-see stance. However, as we can see, the ECB decided to "squeeze" inflation without considering the fragile economic growth in the eurozone.

At the same time, the ECB weakened the euro with its "conclusive" rhetoric. In particular, it was stated that interest rates are already at a level that will be maintained "for a sufficiently long time." According to the ECB, this will significantly contribute to reducing inflation. The central bank hinted that another round of monetary tightening within the current cycle is possible, but such a step would be of an extraordinary nature. This rhetoric did not sit well with the euro, particularly with EUR/USD buyers, resulting in the pair remaining below the 1.06 level.

From a technical perspective, the bears reached the support level at 1.0650, which corresponds to the lower Bollinger Bands line on the daily chart but failed to break through it. Therefore, selling appears risky right now, as you may "catch a price bottom." Short positions should be considered once the pair breaks through 1.0650 (in which case the bearish target will be around 1.0600) or during bullish corrections. In the latter case, the target would be 1.0650.

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EUR/USD: Short-term rise and bearish outlook. Markets eye Fed meeting

Traders are showing a renewed appetite for the euro at the start of this week. However, it is essential to remain cautious. The trend remains bearish, and the eurozone calendar remains almost empty. The US dollar is under the spotlight this week. Meanwhile, some predict another US dollar rally.

What to expect from EUR/USD this week?

The euro will likely face pressure against the greenback in the coming weeks, especially after dipping below a critical level last week. With no new data from the eurozone, the Fed's upcoming rate decision might not add to this pressure and could even boost the pair's quotes. Everything hinges on the message from the US regulator.

The following trading sessions will be tense. The direction for the EUR/USD pair remains unclear, even if some think otherwise. As we know, markets can quickly shift their sentiment.

Following the European Central Bank's (ECB) recent decision on interest rates, the euro began to decline. The decision confirmed rates would remain steady for the foreseeable future, signaling a pause in rate hikes.

The euro hovered near 1.0675, the lowest level since March 2023.

There were initial attempts for a euro rally after the ECB decided to hike rates by 25 basis points, peaking at 1.0729, but these efforts did not bear fruit. This could lead to a test of this year's range between 1.0500 and 1.1000.

Markets expect the ECB to tighten its policy by approximately 11 basis points and cut by 25 basis points in July 2024. This could pressure the euro, especially if followed by a soft review.

The current instability of the EUR/USD pair suggests a stronger dollar position, especially after falling below the 200-day moving average on the daily chart.

Analysts at Societe Generale say that this looks ominous.

Upcoming economic data is anticipated to show a slowdown, implying a downturn in the eurozone due to high interest rates. This economic slowdown will work against the euro.

The euro might remain at risk until economic growth in the eurozone starts to rebound.

The only silver lining for the euro or British pound, in a context where growth forecasts drive currency trajectories, is that growth expectations for the UK and eurozone are already bleaker than in the US.

This should help prevent a dramatic drop in the EUR/USD or GBP/USD pairs, but the pound could still reach 1.2000 and the euro could fall below 1.0500 if we do not see any positive economic news in the near future.

Euro Technical Analysis

The EUR/USD pair is bracing for a rebound from the multi week low of 1.0630 that was recorded on Friday.

If the pair breaks the 15 September low of 1.0631, the next targets will be the 15 March low of 1.0516 and then the 6 January 2023 low of 1.0481.

If the pair breaks through the level of 1.0827 (200-day simple moving average), it could encourage a bullish move to 1.0922 and then the August 30 high of 1.0945.

A break above this level could facilitate a test of the psychological level of 1.1000 and the August 10 peak at 1.1064.

Fed meeting

The US central bank is preparing to release its latest decisions and recommendations, which may cause volatility for the US dollar. However, many experts believe that major changes in the Fed's monetary policy are unlikely.

Highlights include

Rate Forecasts: Many economists expect the Fed to keep rates at 5.25-5.50%.

Fed Dot Plot. This chart will show how FOMC members see future interest rate movements. Most members will likely indicate that the current rate level will remain unchanged through the end of 2023.

Risks for the US dollar. If the dot plot shows that some Fed members are considering a rate cut in 2024, it could put pressure on the dollar.

Fed Summer Indicators. Two CPI inflation reports are expected to be close to consensus. These data, along with other economic indicators, will confirm that the current level of interest rates is likely adequate to stabilize inflation.

Based on these projections and analysis, the Fed's decisions may confirm the current trend in monetary policy and, as a result, the resilience of the dollar in global markets.

US Dollar Technical Analysis

The US dollar index is near its 2023 high of 105.88. Short-term support and resistance levels are located at 104.44 and 105.88 respectively. The long term support level is marked at 103.04.

Bullish Scenario. If the DXY closes above 105.88 during the week, it could signal further dollar strength in the medium term.

Bearish Scenario. If the index reverses and breaches the level of 104.44, it could signal a significant decline to 103.04.

Economic Outlook. Despite the current difficulties, the US dollar continues to attract investors due to high interest rates, especially compared to the economic situation in Europe and elsewhere.

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Trading Signals for GOLD (XAU/USD) for October 20-23, 2023: sell below $1,980 (21 SMA - double top)

Early in the European session, gold is trading around 1,977.41, above the 21 SMA, and below the 8/8 Murray. Gold reached a new high around 1,982.12 and is showing indecision which is likely to trigger a strong technical correction in the coming hours.

Since October 4, gold has been trading within an uptrend channel and has now reached the top of this channel, which means that a technical correction could occur in the next few hours with the target in the area of 1,944 (21 SMA).

Yesterday, during a speech by the Fed Chairman, expectations were generated that the Fed would not raise interest rates anymore. This fueled the demand for gold as a safe haven asset reaching a new high.

As investors do not expect any further interest rate hikes this year, gold could continue to rise. However, we should expect a technical correction to occur as long as gold trades below the psychological level of $2,000.

A good level to buy could be around 1,944 (21SMA) or around 6/8 Murray at 1,937. Both levels could give us the opportunity to buy again with goals at the psychological level of $2,000.

On the other hand, if XAU/USD continues to rise and reaches the 8/8 Murray level around $2,000 in the next few hours, it could face strong rejection. This 8/8 area acts as strong resistance and a key level. We could use the pullback to sell below this area with the target at 1,937.

The eagle indicator once again reached the extremely overbought zone. So, we expect a technical correction to occur in the next few hours. Hence, our strategy could be to sell below 1,980 with targets at 1,962 and 1,944.

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GBP/USD: Pound slightly weakens, but selling still risky as dollar remains weak

The pound-dollar pair surged by more than 200 points yesterday, reacting to the publication of inflation growth data in the United States. The resonant release put an end to discussions about the Federal Reserve's future steps—at least in the context of the December meeting. The probability of the Fed raising interest rates in December decreased to 5%, meaning the market is almost certain that the U.S. regulator will maintain the status quo next month.

The inflation report played the role of a cold shower for dollar bulls. Last week, Federal Reserve representatives, including Chairman Jerome Powell, thoroughly heated the public with their hawkish statements, so the sharp shift in sentiment significantly impacted the greenback. The U.S. Dollar Index dropped from 105.60 to 103.80 in just a few hours, reflecting the anti-rally of the American currency. The GBP/USD pair did not stay on the sidelines and updated a two-month price high, testing the 1.2500 level for the first time since September.

But, as they say, "not everything is rosy." The pound rested on its laurels only briefly, as inflation data in the United Kingdom were also published following the U.S. report. It can be said that today, GBP/USD buyers also experienced a cold shower, as almost all components of the UK data were in the red. Certain conclusions can be drawn here as well, primarily regarding the prospects of tightening monetary policy by the Bank of England. These conclusions do not favor the pound as they suggest the central bank will maintain the status quo after the upcoming meetings.

For instance, the overall Consumer Price Index in the UK sharply dropped to zero month-on-month (forecasted to decline to 0.1%) after two consecutive months of growth (0.5% in September). In the year-on-year calculation, the overall index also ended up in the red, reaching 4.6% (forecast at 4.8%)—the weakest growth rate since October 2021. For comparison, the overall CPI was at 6.7% YoY in September.

A separate line needs to be drawn for the core Consumer Price Index, excluding energy and food prices. In June and July, it was at 6.9%, but it dropped to 6.2% in August. In September, the indicator again demonstrated a downward trend (6.1%), as well as in October—5.7% (while most experts predicted a decline to 6.0%). This is the lowest value of the indicator since March 2022.

The Retail Price Index, used by British employers in salary negotiations, similarly ended up in the red zone: -0.2% MoM (forecasted to grow by 0.1% MoM) and 6.1% YoY (forecasted to grow to 6.3%)—a two-year low, the weakest growth rate of the indicator since October 2021.

However, some components of the data entered the green zone but remained in the negative territory. For example, the Producer Purchase Price Index in the year-on-year calculation rose to -2.6% (forecast at -3.3%), and the Producer Selling Price Index reached -0.6% YoY (forecasted to decline to -1.0% YoY).

Commenting on the published report, the chief economist of the Office for National Statistics stated that the decline in inflation occurred against the backdrop of falling energy prices. According to him, the downward trend in key indicators is associated with the decrease this month in the maximum level of energy prices, which limits the amount that suppliers can charge consumers per unit of energy.

The sharp decline in inflation in the United Kingdom is a significant blow to the positions of the British currency. However, an interesting situation has developed for the GBP/USD pair: the dollar is knocked out after yesterday's release, and the pound is knocked down after today's news. Sellers of the pair managed to muffle the upward impulse but failed to turn the situation in their favor.

At the moment, it is challenging to say whether sellers of GBP/USD will be able to reverse the trend. Despite the weak positions of the pound, the pair may resume its upward movement due to further weakening of the American currency. The disappointment of the dollar bulls is too great: just last week, Powell stated that the current level of the Fed's rate might be "insufficient" to curb inflation. However, after the publication of CPI growth data in October, his words lost their relevance. Therefore, rushing to sell GBP/USD now may not be advisable—after a short pause, buyers may regain the initiative in the pair.

From a technical perspective, the pair is currently testing the support level of 1.2450 (the upper line of the Bollinger Bands indicator on the daily chart). In this price range, the downward pullback has stalled. This is another signal indicating the unreliability of short positions. It is advisable to consider selling only after sellers firmly establish themselves below the 1.2450 target—in this case, the next price target will be the level of 1.2340 (the Tenkan-sen line on D1).

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Dollar versus Gold: New Employment Data in the U.S. and Its Impact on the Market

This significant rise in gold prices was recorded on Monday, but by Tuesday, the situation had dramatically changed: the price decreased by 0.5%, reaching $2,020.29 per ounce. This decline followed the record achievement and a reduction of more than $100 in a single day, closing the market session with a loss of over 2%.

It is noteworthy that American gold futures also showed a decrease, falling by 0.3% to $2,036.30.

Experts predict that the growth that led to Monday's record may temporarily subside. This is due to uncertainties around the prospects of the U.S. monetary and credit policy. However, geopolitical risks may contribute to gold reaching new heights in the future.

Jim Wyckoff, a senior analyst at Kitco Metals, emphasized that the gold market has taken a pause after the recent rally. He also suggested that the $2,000 level might become a new floor for gold in the market.

Significant impact on market trends is also exerted by employment data in the U.S. Recent reports showed a decrease in the number of job openings in the country to a level not seen in more than two and a half years. This indicates that the rise in interest rates is starting to affect the demand for labor.

Thus, investors are eagerly awaiting the U.S. non-farm employment report for November, which will be published on Friday. These data may provide a clearer understanding of the future movements of U.S. interest rates, which, in turn, will affect the dynamics of both the dollar and gold.

The dollar, in turn, has strengthened its position, showing a growth of 0.2% and approaching a two-week high. Such strengthening of the currency made gold more expensive for holders of foreign currencies, which also played a role in changing market dynamics.

Traders are actively assessing current economic trends, especially the likelihood of a reduction in interest rates by the U.S. Federal Reserve (Fed) in March. According to the CME FedWatch tool, the probability of such a reduction is currently estimated at 66%. Historically, a decrease in interest rates is a factor that typically provides support in the market for non-interest-bearing bullion such as gold.

In light of this, experts from Commerzbank suggest that the price of gold may reach $2,100 per troy ounce by the second half of 2024. This forecast is based on the expectation that the Fed will begin the process of lowering interest rates.

Against this backdrop, there is also a decline in prices of other precious metals. Spot silver fell by 1.4%, reaching a price of $24.16 per ounce. The price of platinum also decreased, by 1.8%, settling at $899.80 per ounce.

Palladium, continuing the trend, also showed a decline of 4.1%, reaching a more than five-year low at $936.24 per ounce. This decrease highlights the overall trend of instability in the precious metals market, influenced by both economic and geopolitical factors.

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WGC Gold Forecast for 2024​​​​​​​

The World Gold Council on Wednesday published a report on gold demand trends for the fourth quarter and the year 2023. The report states that the annual demand for the precious metal, excluding over-the-counter markets, amounted to 4,448 tonnes. This is 5% lower than the demand registered in 2022. However, considering over-the-counter markets and equity flows, the overall demand for gold last year rose to a record 4,899 tonnes.

According to the latest report from the World Gold Council, central bank purchases and purchases of metal on over-the-counter markets contributed to a huge physical demand, leading to a record-high price in the last month of the year. Juan Carlos Artigas, head of WGC's research department, said despite challenging obstacles, as the Federal Reserve continued its aggressive monetary policy, supporting higher bond yields, the precious metal managed to grow by 15%.

Judging by the final price of gold on LBMA, the yellow metal ended 2023 at $2,078.40 per ounce with an average price of $1,940.54 per ounce. This is also a record, 8% higher than the prices of 2022. According to final estimates, central banks bought 1,037 tonnes of gold last year, falling short of the 2022 record by only 45 tonnes.

Over the last ten years, central bank demand has almost doubled compared to the average figure.

As for the World Gold Council's forecast, WGC still expects substantial purchases by central banks in 2024. The report states that central bank demand will return to the pre-record average level of around 500 tonnes.

Analysts also noted that the leader among central banks in gold purchases last year was the People's Bank of China, which acquired 225 tonnes throughout the year. For comparison, the National Bank of Poland was the second-largest gold buyer, purchasing 130 tonnes, thereby increasing its gold reserves by 57%.

Demand for gold-backed ETFs was also driven by Chinese investors. However, China's economy is facing growing obstacles and economic uncertainty. Nevertheless, the precious metal may attract certain demand from Chinese investors.

The report also suggests that central banks may not continue the rapid pace of purchases observed in the last two years, but this trend clearly indicates that gold has become an important risk management tool.

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Stocks and the dollar: stability vs. growth ahead of key consumer price index

At the start of the week, global market indices remained virtually unchanged, while the US currency slightly strengthened ahead of Tuesday's consumer price index report in the US, which could hint at when the Federal Reserve might begin cutting interest rates.

In the realm of cryptocurrencies, Bitcoin reached $50,000, a level not seen in over two years, with its value increasing by 5.6% to $50,207. Cryptocurrency stocks also saw gains: Coinbase Global (COIN.O) increased by 3.7%.

The S&P 500 index slightly fell after reaching a new intraday record high. Last week, the S&P 500 index surpassed 5,000 points for the first time in history. The MSCI global stock index remained unchanged after reaching its highest level since January 2022.

The January report on the consumer price index is expected on Tuesday, with the US producer price report to follow later in the week. Investors are also eagerly awaiting the January US retail sales report, set for release on Thursday.

Initial expectations of a Fed rate cut at the upcoming meeting were not met due to data indicating the economy remains stable.

Market estimates put the likelihood of rates staying unchanged in March at 84.5%. According to CME FedWatch Tool data, the chance of a rate cut of at least 25 basis points in May dropped to 61% from over 95% at the start of 2024.

"Moderate consumer price index data and soft retail sales should reinforce the Fed's confidence that inflation is returning to its target," said Mark Chandler, chief market strategist at Bannockburn Global Forex in New York.

The Dow Jones Industrial Index (.DJI) rose by 125.69 points, or 0.33%, to 38,797.38, the S&P 500 (.SPX) lost 4.77 points, or 0.09%, to 5,021.84, and the Nasdaq Composite (.IXIC) dropped 48.12 points, or 0.30%, to 15,942.55.

Among the Dow Jones index components, Nike Inc (NYSE:NKE) shares increased by 2.71 points (2.59%) and closed at 107.21. Shares of Goldman Sachs Group Inc (NYSE:GS) went up by 8.63 points (2.25%), finishing at 392.89. Shares of 3M Company (NYSE:MMM) rose by 1.76 points (1.89%), closing at 94.66.

Shares of Salesforce Inc (NYSE:CRM) fell by 3.76 points (1.29%), ending the session at 287.54. Shares of Microsoft Corporation (NASDAQ:MSFT) rose by 5.29 points (1.26%), closing at 415.26, while shares of Apple Inc (NASDAQ:AAPL) dropped in price by 1.70 points (0.90%), finishing trading at 187.15.

Among the S&P 500 index components, shares of VF Corporation (NYSE:VFC) appreciated by 13.92% to 17.43, Diamondback Energy Inc (NASDAQ:FANG) gained 9.38%, closing at 165.98, and shares of Mohawk Industries Inc (NYSE:MHK) increased by 6.61%, ending the session at 117.28.

Shares of Motorola Solutions Inc (NYSE:MSI) decreased in price by 3.20%, closing at 320.30. Shares of ServiceNow Inc (NYSE:NOW) lost 3.19%, ending trading at 786.98. Quotes of Monolithic Power Systems Inc (NASDAQ:MPWR) dropped by 2.98% to 729.87.

Among the NASDAQ Composite index components, shares of Beamr Imaging Ltd (NASDAQ:BMR) surged by 371.56% to 9.95, Renalytix Ai Plc (NASDAQ:RNLX) increased by 228.00%, closing at 1.25, and shares of Millennium Group International Holdings Ltd (NASDAQ:MGIH) rose by 201.94%, ending the session at 3.11.

Shares of AN2 Therapeutics Inc (NASDAQ:ANTX) decreased in price by 74.50%, closing at 5.10. Shares of Medavail Holdings Inc (NASDAQ:MDVL) lost 43.22%, ending trading at 1.80. Quotes of TOP Financial Group Ltd (NASDAQ:TOP) dropped by 40.63% to 3.20.

Shares of Goldman Sachs Group Inc (NYSE:GS) reached a 52-week high, increasing by 2.25%, 8.63 points, and finished trading at 392.89. Shares of Beamr Imaging Ltd (NASDAQ:BMR) reached a historical high, rising by 371.56%, 7.84 points, and ended trading at 9.95. Shares of Medavail Holdings Inc (NASDAQ:MDVL) fell to a 3-year low, losing 43.22%, 1.37 points, and closed at 1.80.

The global stock index MSCI (.MIWD00000PUS), tracking stocks in 49 countries, dropped by 0.01%. European stocks (.STOXX) increased by 0.5%.

Markets in China, Hong Kong, Japan, South Korea, Singapore, Taiwan, Vietnam, and Malaysia were closed for holidays.

Financial markets in mainland China were closed for the Lunar New Year holiday and will resume trading on Monday, February 19. Trading in Hong Kong will resume on February 14.

Investors also tempered their expectations for a European Central Bank rate cut after two policy makers stated last week that the ECB needs more evidence of inflation falling before it can reduce rates.

On Monday, the Federal Reserve Bank of New York published its January survey of consumer expectations, which showed that inflation expectations for one year and five years remained unchanged at 3% and 2.5%, respectively. The predicted inflation growth over three years fell to 2.4%, the lowest level since March 2020, from December's 2.6%.

The dollar index, which tracks the dollar's performance against a basket of other major trading partners' currencies, increased by 0.1% to 104.13.

The dollar rose by 0.03% against the yen to 149.35, while the euro dropped by 0.1% for the day to $1.0769.

The yield on US Treasury bonds fell, with the rates on benchmark 10-year bonds decreasing after three consecutive periods of growth.

The yield on the benchmark 10-year US Treasury bonds decreased by 1.9 basis points to 4.168% from 4.187% late on Friday.

Oil futures closed mixed, almost unchanged. Concerns over interest rates and global demand caused the market to pause after prices jumped by about 6% last week.

US oil increased by 8 cents and settled at $76.92 per barrel. Brent crude oil decreased by 19 cents and settled at $82.

Spot gold prices fell by 0.3%.

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Inflationary explosion in the US: how do the dollar and bonds react?

The consequences of high inflation are felt across the financial market. Specifically, the main Wall Street indices reacted to this news with a decrease after the publication of data indicating a higher than expected rise in consumer prices. This event pressured the expectations regarding the imminent lowering of interest rates, which in turn led to an increase in the yield of US Treasury bonds.

Among other things, the Dow Jones Industrial Average recorded its most significant drop in almost 11 months after the US Department of Labor's report showed an unexpected increase in consumer prices in January, especially due to the rise in housing costs.

Against this backdrop, market indices, which were on the rise in anticipation that the Federal Reserve System (FRS) would begin to lower rates as early as May, showed negative dynamics. The S&P 500 index, for example, closed above the 5000 point mark for the first time, and the Dow Jones index traded near record-high values. However, the publication of inflation data revised expectations regarding the FRS's policy, increasing the likelihood that rate cuts may not occur until June.

Mega-cap companies sensitive to rates, such as Microsoft, Alphabet, Amazon.com, and Meta Platforms, showed a decrease in stock prices amid the rise in yields of US Treasury bonds to a two-month high. A similar situation was observed among chip manufacturers, including Micron Technology, Qualcomm, and Broadcom, which led to a 2% drop in the Philadelphia SE Semiconductor index.

The real estate, consumer discretionary, and utilities sectors faced the most significant losses among the 11 major industry indices of the S&P 500, especially real estate, which reached its lowest values in more than two months.

Small-cap companies also felt the pressure, with the Russell 2000 index showing the most significant daily drop since June 2022.

"Various statements by Federal Reserve System officials in recent weeks have indicated that the market-anticipated rate cuts in the first half of the year might have been premature. The latest consumer price index data certainly confirms this trend," commented Bob Elliott from Unlimited Funds.

The consumer inflation data followed a modest revision of inflation figures for the last quarter of 2023, giving investors temporary relief regarding inflation expectations.

The Cboe Volatility Index reached its highest level since November, highlighting the growing market concern. The S&P 500 and Nasdaq Composite indices lost 1.37% and 1.79% respectively, while the Dow Jones Industrial Average fell by 1.36%, marking its most significant decline since March 2023.

Among other developments, JetBlue Airways shares surged by 21.6% after Carl Icahn disclosed his stake in the company, calling the shares "undervalued." Arista Networks' shares declined by 5.5% following a gross profit forecast below expectations, and Marriott International lost value after forecasting annual earnings below analyst expectations.

Cadence Design Systems and toy manufacturer Hasbro also faced a drop in share value after publishing gloomy forecasts. Meanwhile, Tripadvisor shares jumped by 13.8% following the announcement of the creation of a special committee to review deal proposals.

The total trading volume on US exchanges reached 12.9 billion shares, comparable to the average of the last 20 sessions at 11.71 billion shares.

The US stock market continues to demonstrate record levels, supported by leading technology companies and expectations of Federal Reserve rate cuts. The global stock index MSCI and the Stoxx 600 European index also showed a decline amid current events.

The dollar index reached a three-month high, and bitcoin set a new record since December 2021, despite subsequent declines.

Data on US retail sales and the producer price report are expected shortly, which may further influence market sentiments.

The rise in oil prices continues amid tensions in the Middle East and Eastern Europe, with Brent crude futures and West Texas Intermediate showing significant increases. Meanwhile, gold prices fell below the key level of $2000 per ounce after the CPI data was released, reaching a two-month low.

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XAU/USD: review and analysis

The positive factor for raw materials currently lies in the fact that the dollar bulls are awaiting important economic events regarding the path and timing of the Federal Reserve's interest rate reduction. This week, the FOMC minutes will be published, which is expected to contribute to some impulse in the precious metal.

Also, a decent increase in Treasury bond yields provides some support for the U.S. dollar and limits the rise of the non-yielding yellow metal. In addition, the overall positive tone in the stock markets contributes to restraining the global increase in the price of gold.

And since yesterday was a holiday in the United States, there were no significant movements in the markets. From a technical point of view, any upward movement is likely to encounter some resistance near the $2,030 level, where the 50-day SMA is located, with subsequent testing. If this level is decisively surpassed, it will create a foundation for further growth beyond the intermediate barrier at $2,044–2,045 towards the supply zone at $2,065.

On the other hand, the 100-day SMA, currently around $1,992–1,991, may act as immediate support before the $1,983 region or the two-month low reached on Wednesday. Following this is the 200-day SMA, currently tied to the $1,965 area, and in the case of a decisive breakthrough, it will be considered a new trigger for the bears.

After that, gold may accelerate its decline to the November 2023 low, with some obstacles along this path.

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2025: Gold and oil raise rates

In Asian markets on Tuesday, gold prices remained within a narrow range amid fears of long-term interest rate hikes. The absence of trading signals was also due to a holiday in the American market.

Gold demonstrated some strengthening, reaching the $2000 per ounce mark after recovering from a two-month low over the last two trading sessions. However, current fluctuations in gold prices are still occurring within the range of $2,000-$2,050, which was established for the majority of 2024.

Spot gold prices increased slightly by 0.1% to $2,019.17 per ounce, while the price of gold futures expiring in April settled at $2,030.20 per ounce as of 23:34 Eastern Time.

Analysts from Citibank highlight three main catalysts that could push gold prices to $3000 per ounce and oil to $100 per barrel in the next 12-18 months. Among them are a sharp increase in gold purchases by central banks, stagflation, and a deep global recession. Currently, gold is trading around the $2016 mark and could rise by approximately 50% in the event of any of these scenarios materializing.

Analysts point to dedollarization in central banks of developing countries as the most likely path to reaching $3000 per ounce of gold. This would lead to a doubling of gold purchases by central banks and shift the focus of demand from jewelry to gold as the main driver.

Central bank gold purchases have reached record levels in recent years, aiming to diversify their reserves and reduce credit risk. Leading this trend are the central banks of China and Russia, as well as India, Turkey, and Brazil, actively increasing their gold bullion purchases. According to the World Gold Council, global central banks have maintained a level of net gold purchases exceeding 1000 tons for two consecutive years.

In the context of a global recession, a deep economic downturn could force the United States Federal Reserve to drastically cut rates, which, in turn, could be the reason for gold prices to rise to $3000. Gold traditionally exhibits an inverse correlation with interest rates, becoming a more attractive asset compared to fixed income in a low-rate environment.

Stagflation, combining high inflation with economic slowdown and rising unemployment, could also trigger a rise in gold prices, despite the low likelihood of such a scenario. Gold is perceived as a safe haven in periods of economic instability, attracting investors looking to avoid risks.

In addition to the above factors, Citi suggests that the baseline scenario for gold involves reaching a price of $2150 per ounce in the second half of 2024, with an expected average price just over $2000 per ounce in the first half of the year. Record prices may be achieved by the end of 2024.

Although geopolitical tensions in the Middle East provide support for gold prices, a more significant price increase is restrained by the prospect of long-term interest rate hikes in the US.

Traders are lowering expectations regarding the Federal Reserve's imminent rate cuts following reports of high inflation in the US, and statements from Fed officials reinforce assumptions about maintaining high interest rates over a longer period.

The outlook for gold in the near future remains uncertain, similar to the situation in the market for other precious metals. Prices for platinum and silver show a decline, and copper experiences a slight drop in price, despite a reduction in the base interest rate in China, the largest importer of the metal.

In the context of the oil market, analysts consider a scenario where oil prices could once again reach $100 per barrel, considering risks associated with geopolitical tensions, actions by OPEC+, and possible supply disruptions from key oil-producing regions. Tensions in the Middle East, particularly the conflict between Israel and Hamas, and increasing tension on the border between Israel and Lebanon highlight potential risks for oil suppliers in the OPEC+ region.

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US election: Wall Street at a crossroads

The S&P 500 and Nasdaq indices ended the trading session in the negative on Friday, retreating from the record highs reached during the day. This decline occurred against the backdrop of a decline in the sector of chip manufacturers and mixed data on the labor market, reflecting the exceeding of expectations for the number of jobs created while the unemployment rate rose.

During the trading session, the S&P 500 and Nasdaq indices briefly hit all-time highs, but by evening their dynamics changed to decline. The Philadelphia Semiconductor Index (.SOX) experienced a noticeable drop, losing 4% by the close of the day after earlier reaching the day's high.

Shares of Nvidia (NVDA.O), highly regarded in the market for its contributions to the development of chips for artificial intelligence, suffered a 5.6% loss, ending their six consecutive sessions of gains. This was despite the fact that they were up more than 5% in early trading.

Broadcom (AVGO.O) shares in the chipmaker index also experienced a significant decline of 7%, driven by low investor expectations for the company's full-year outlook. In addition, Marvell Technology (MRVL.O) lost 11.4% in value after its first-quarter guidance fell short of market expectations due to weaker demand.

The stock posted gains at the open after data showed that U.S. job growth accelerated in February, with job openings in the nonfarm payroll sector rising by 275,000, exceeding analysts' forecasts for a gain of 200,000. At the same time, the January jobs data was downwardly revised.

There is also an increase in the unemployment rate in February to 3.9% compared to the previous figure of 3.7%, which was maintained for three months. It should be noted that the rate of wage growth fell to 0.1% on a month-over-month basis.

Brian Price, head of investment management at Commonwealth Financial Network, highlighted a trend toward more restrained spending on the part of consumers. This is reflected in shares of Costco Wholesale (COST.O), which posted a 7.6% decline as its quarterly sales volumes fell short of expectations due to moderate demand for higher-priced goods.

Nevertheless, Price emphasized that overall market sentiment remains optimistic with the anticipation of continued growth in the absence of any negative factors.

He expressed his belief that the market is focused on the continuation of the favorable situation: inflation is expected to be maintained at a moderate level and the Federal Reserve is expected to initiate a policy of easing economic conditions.

Upcoming data for February, which will be released next week and include information on the consumer price index (CPI) and retail sales, will provide additional information that could influence the assessment of the possibility of lowering interest rates.

In a speech on Thursday, Jerome Powell, chairman of the Federal Reserve, shared his view that the central bank is nearing the point where it is confident enough that inflation is falling, allowing it to begin the process of lowering interest rates.

While investors continue to analyze possible profits and keep an eye on monetary policy, they are also beginning to consider a new factor that could significantly impact market conditions this year - the upcoming U.S. presidential election in 2024.

In an address to the nation on Thursday, US President Joe Biden put forward a proposal to raise corporate taxes, while his predecessor and potential Republican Party rival, Donald Trump, earlier in 2017 passed legislation aimed at cutting taxes for companies and the wealthy. Biden also expressed pride in U.S. economic achievements during his presidency.

It is difficult to determine how politicians' proposals and initiatives ahead of the election will affect asset market prices. The winner of the election is likely to face the challenge of dealing with a divided Congress, which could significantly complicate any legislative initiatives.

This uncertainty does not stop analysts from trying to assess how political changes may interact with other key elements influencing market dynamics. Such factors include increasing interest in the business outlook for artificial intelligence and adjusting expectations about when the Federal Reserve might begin easing monetary policy. The S&P 500 Index (.SPX) has made notable gains, up 7.4% YTD and near all-time highs.

Polls show a tight contest between the 81-year-old Biden and 77-year-old Trump. Despite the U.S. economy performing better than most advanced economies, the American people generally express higher confidence in Trump's economic competence in polls.

As part of his speech on Thursday, Biden unveiled an initiative to impose a 21% minimum tax on the profits of corporations whose revenues exceed $1 billion, building on the provisions of the 2022 Clean Energy Act.

In addition, he expressed his intention to reinstate his "billionaires tax" initiative, which would impose a minimum tax of 25% on the income of U.S. citizens whose wealth exceeds $100 million.

Analysts note that the Republicans' success in the elections is likely to entail an extension of the 2017 tax cuts, which could lead to higher inflation. At the same time, the Democrats' victory will result in an increase in tax rates for households and corporations with high income.

The Dow Jones Industrial Average (.DJI) index of industrial companies closed down 68.66 points, or 0.18%, stopping at 38,722.69. The S&P 500 Index (.SPX) fell 33.67 points, or 0.65%, to settle at 5,123.69, while the Nasdaq Composite (.IXIC) fell 188.26 points, or 1.16%, to 16,085.11.

Among the 11 key sectors in the S&P 500, the technology sector (.SPLRCT) posted the largest decline, losing 1.8%. It was followed by the consumer staples sector (.SPLRCS) with a 0.8% drop, where Costco made a significant contribution.

Over the past week, the S&P 500 Index declined 0.26%, the Nasdaq fell 1.17%, and the Dow Jones lost 0.93%.

Meanwhile, real estate stocks (.SPLRCR) were the biggest gainers, rising 1.1%. Behind them are shares of energy companies (.SPNY), which grew by 0.4%.

Shares of Gap (GPS.N) jumped 8.2% as the retailer beat Wall Street analysts' forecasts for fourth-quarter results. That was due to increased demand for a revamped assortment of Old Navy and Gap-branded merchandise during the holiday season, as well as lower volumes of discounted merchandise.

On the New York Stock Exchange, the number of stocks that increased in value outnumbered those that declined by a ratio of 1.25 to 1, with 708 new highs versus 48 new lows.

On the Nasdaq exchange, the number of stocks that increased totaled 2,086, while 2,192 declined, showing a predominance of declining over rising stocks with a ratio of about 1.05 to 1.

The S&P 500 index marked 65 new 52-week highs and recorded no new lows, while the Nasdaq recorded 351 new highs and 83 new lows.

Trading volume on U.S. exchanges reached 12.29 billion shares, which compares with an average of 12.08 billion over the past 20 sessions.

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Wall Street's decline driven by tech sector and Fed rates

The global stock index also showed a decrease on Friday, setting a course for a weekly decline after seven consecutive weeks of gains, while the dollar strengthened, heading for its most significant weekly gain since mid-January as the latest US inflation data fueled new hopes for interest rate cuts.

Data released on Friday showed a slight increase in US import prices in February, as the rise in the cost of petroleum products was partially offset by modest growth in other areas, suggesting an improvement in the inflationary landscape.

Stocks this week faced challenges after US consumer and producer price data indicated that inflation remains persistent, dampening expectations that the Federal Reserve would cut rates by its June meeting.

Market assessments of a Fed rate cut of at least 25 basis points in June stand at 59.2%, down from 59.5% in the previous session and 73.3% a week ago, according to CME's FedWatch Tool.

The central bank is expected to maintain interest rates at its meeting next week, but investors will closely monitor the central bank's economic forecasts, including interest rate projections.

On Wall Street, the Dow Jones Industrial Average (.DJI) fell by 190.89 points, or 0.49%, to 38,714.77, the S&P 500 (.SPX) lost 33.53 points, or 0.65%, to 5,116.95, and the Nasdaq Composite (.IXIC) dropped 155.35 points, or 0.96%, to 15,973.17.

Over the week, the S&P 500 lost 0.13%, the Dow dropped 0.02%, and the Nasdaq decreased by 0.73%.

Additionally, a study by the University of Michigan showed its preliminary consumer sentiment and inflation expectations data barely changed in March, while a separate report indicated that US factory production in February increased more than expected.

Adobe (ADBE.O) shares fell by 13.7% the day after the company forecasted second-quarter revenue below analysts' estimates, citing competition and weak demand for photos, illustrations, and videos integrated with artificial intelligence.

Among other declining stocks, Ulta Beauty (ULTA.O) shares fell by 5.2% after its projected annual profit came in below Wall Street estimates, as rising supply chain costs and intensified promotional activities negatively impacted its profits.

The S&P 500 technology index (.SPLRCT) dropped by 1.3% for the day, leading the downturn among sectors. Shares of Microsoft (MSFT.O) fell by 2.1%, marking one of the index's most significant declines.

The semiconductor index (.SOX) decreased by 0.5% on Friday, registering its most significant weekly percentage drop since the beginning of January. Announcements related to AI at Nvidia's (NVDA.O) GTC developers conference, scheduled for March 18-21, will be closely watched.

The Russell 2000 index of small-cap companies (.RUT) fell by 2.1% for the week.

Friday's volume was the highest of the year on US exchanges, with 18.76 billion shares traded. The average full-session volume over the last 20 trading days was about 12.4 billion.

Although Wall Street's AI-driven growth has stalled, the S&P 500 index has continued to rise by 7.3% since the beginning of the year.

According to data released on Friday, US factory production in February grew more than expected, but the January figure was sharply revised downwards, as production continues to be constrained by higher interest rates.

The dollar index gained 0.05% to 103.43, recovering some of the previous week's decline with a 0.71% increase, while the euro rose 0.06% to $1.0889 for the session. The sterling weakened by 0.13% to $1.273.

Against the Japanese yen, the dollar strengthened by 0.49% to 149.05, despite expectations that the Bank of Japan is expected to end its negative interest rate policy at its meeting next week.

The MSCI global stock index (.MIWD00000PUS) fell by 5.07 points, or 0.66%, to 767.58, heading for its third consecutive daily drop, the longest streak since the beginning of the year, and a 0.48% decrease for the week.

The STOXX 600 index (.STOXX) closed down by 0.32%, while the broader European index FTSEurofirst 300 (.FTEU3) fell by 7.42 points, or 0.37%.

The yield on benchmark 10-year US Treasury bonds rose by 1 basis point to 4.308% after reaching 4.322%, the highest level since February 23. The yield on 10-year bonds this week jumped by 22 b.p., the most significant increase since mid-October.

The yield on 2-year Treasury bonds, which typically moves in step with interest rate expectations, rose by 3.9 basis points to 4.7297% and increased by 24.6 b.p. for the week, marking the biggest jump in two months.

Oil prices fell a day after exceeding the $85 per barrel mark for the first time since November. Oil indices finished the week with a growth of more than 3%. U.S. crude oil decreased by 0.27% to $81.04 per barrel, and Brent crude fell by 0.09% to $85.34 per barrel.

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The main events by the morning: March 26

Bitcoin has returned to the area above $71 thousand. A day earlier, investment guru Jim Roger said that the cryptocurrency would collapse to zero. He does not see any long-term value in it, believing that the crypt will disappear.

The United States has imposed sanctions against Russian operators of CFA and blockchain services. In the list: Atomize, Lighthouse, Distributed Registry Systems, Web3 Tech, B-Crypto, Netexchange, Masterchain.

The Cabinet of Ministers of Russia ordered the sale of 27.5% in the Sakhalin-2 operator company for 95 billion rubles. Gazprom's daughter Sakhalin Project will buy a share, TASS reports.

France may come into direct conflict with Russia in the event of the defeat of the Armed Forces of Ukraine. The LCI channel claims that there are several scenarios for the entry of French troops into the territory of Ukraine, including the deployment of NATO troops in fortified areas and trenches of the Armed Forces of Ukraine, as well as the possible construction of a military plant in Kiev or the deployment of troops in Odessa.

Hamas has confirmed its unwillingness to make concessions. According to Reuters, the Palestinian movement informed the mediators that it would insist on a complete ceasefire in the Gaza Strip, as well as demanding the complete withdrawal of the Israeli military from the region and a «real exchange» of prisoners of war.

The March package of assistance to Ukraine from the United States in the amount of $300 million was used back in November. According to Politico, a representative of the American administration said that these funds are currently «not available for use,» and the approval of assistance was rather a symbolic gesture.

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On the verge of inflation: how the Dow Jones and S&P reacted for the third session in a row

On Tuesday, amid expectations of important economic releases during the short holiday week, US stock markets fell, marking the third consecutive decline for the Dow Jones and Standard & Poor's 500 indexes. Investors are in a wait-and-see mood as they analyze potential changes in Federal Reserve policy.

Tesla (TSLA.O) rose 2.92% on CEO Elon Musk's announcement that he would test self-driving technology for the company's vehicles, available to both new and existing customers in the United States. Over the current week, the stock price has increased by about 4%, although during the year their quotes have decreased by more than 28%.

Market participants are particularly focused on the Personal Consumption Expenditures (PCE) price index, the Federal Reserve's main tool for assessing inflation. It is expected that the latest data on this indicator will be published on Friday, a day when trading on American exchanges will not be held due to the celebration of Good Friday.

It is predicted that in February the inflation index will increase by 0.4%, reaching 2.5% at the annual level. Meanwhile, core inflation, which excludes volatile items such as food and energy, is expected to rise 0.3% for the month, keeping annual growth at 2.8%, according to expert forecasts.

"Friday is key. All attention will be focused on this day, and any events before then will be perceived as background. Therefore, we should not expect significant changes in the market until the data is published," said Stephen Massocca, deputy president of Wedbush Securities. San Francisco.

"It would be extremely risky for the market if there were any speculation that Fed rates have not yet peaked. Any hint from the Fed that interest rates could be raised further could signal an immediate shift away from risk assets."

The U.S. economic sector is growing, with February orders for durable goods exceeding forecasts and equipment investment pointing to the start of a recovery. According to the Conference Board, consumer confidence remained virtually unchanged in March at 104.7.

The Dow Jones Industrial Average lost 31.31 points, down 0.08%, to 39,282.33. The S&P 500 was down 14.61 points (down 0.28%) at 5,203.58, while the Nasdaq Composite was down 68.77 points (down 0.42%) at 16. 315.70.

Last week, all three major US indexes hit new all-time highs after the Federal Reserve confirmed its forecasts for three interest rate cuts this year.

Market expectations for the Fed to cut rates by at least 25 basis points in June continue to rise, now reaching 70.4% probability according to CME's FedWatch tool, up markedly from last week's 59.2%.

Shares of the media and technology group linked to Donald Trump rose 16.1% to close at $57.99 after temporarily hitting $79.38 on the first day of trading following its reverse merger with the company. , specializing in the issue of securities.

McCormick (MKC.N) jumped 10.52% to become the top gainer in the S&P 500, as its first-quarter sales and earnings beat market expectations.

Shares of Seagate Technology (STX.O) also posted strong gains, rising 7.38%, after analysts at Morgan Stanley upgraded the hard drive maker's stock from overweight to overweight.

At the same time, United Parcel Service (UPS.N) shares lost 8.16% following the release of the company's 2026 guidance.

On the New York Stock Exchange, decliners outnumbered advancers by a 1.24-to-1 ratio. A similar trend was seen on the Nasdaq, where decliners outnumbered advancers by a 1.34-to-1 ratio.

Trading volume in US stock markets reached 10.43 billion shares, less than the average volume of 12.23 billion shares over the past 20 sessions. Trading activity is expected to remain moderate throughout the current week, and as the holidays approach, volumes may decline further.

The pan-European stock index STOXX 600 gained 0.24%, while MSCI's index of Asia-Pacific shares ex-Japan closed 0.25% higher at 535.59.

Market attention is focused on the Japanese yen, which remains at its weakest against the dollar since 1990 despite the Bank of Japan raising interest rates last week for the first time in 17 years.

The dollar strengthened 0.1% against the yen to hit 151.56, raising the risk of Japanese intervention to prevent further weakening of its currency. In October 2022, the dollar/yen exchange rate rose to 151.94, followed by a decline due to intervention.

Japanese Finance Minister Shunichi Suzuki on Tuesday expressed readiness to consider options to stabilize the yen, reiterating statements made the day before by the country's top monetary policy official.

The US dollar was marginally weaker, down 0.06% at 7.248 against the offshore Chinese yuan, which strengthened thanks to an unexpectedly high trading range setting. The yuan's fall the previous Friday, after a period of market volatility, had sparked concern among investors, with some speculation that China could loosen controls on its currency, allowing it to fall.

Spot gold rose 0.24% to $2,176.69 an ounce, while U.S. gold futures rose 0.09% to $2,176.80 an ounce. In the cryptocurrency space, Bitcoin lost 1.74% to $69,753.73, while Ethereum fell 1.55% to $3,572.7.

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S&P 500 breaks records: the most successful quarter in the last five years

Amid the latest economic data, the S&P 500 ended the week with positive dynamics, marking its best quarterly result in the last five years. Investors are optimistic about the future, awaiting new information on inflation.

Breakout of leading indices

In addition to the S&P 500, two other key US indices also posted significant gains this quarter. The 10.16% rise for the S&P 500 was driven by growing interest in artificial intelligence stocks and speculation that the Federal Reserve will cut interest rates this year.

Dow Jones on the verge of historic achievement

The Dow Jones index is approaching a significant milestone of 40,000 points, less than 1% away from this goal.

Economic progress and labor market sustainability

The latest data shows the US economy grew faster than expected in the fourth quarter, helped by strong consumer spending. Additionally, the decline in initial unemployment claims underscores the stability in the labor market.

Optimism among experts

"The economy and consumers are doing well as they continue to spend. Unemployment remains low and there are regions where the economy is thriving... There are funds that want to be spent in a variety of ways," shares George Young, portfolio manager at Villere & Company.

Nasdaq reaches new heights

The tech-heavy Nasdaq Composite Index also posted its first record peak since November 2021, opening up new opportunities for investors.

Belief in a "soft landing" of the economy

A key factor in this year's success has been investor confidence in the possibility of a "soft landing" for the economy, which involves lowering inflation without leading to a major recession.

Looking to the future: soft landing is a priority

A BofA Global Research survey conducted in March shows more than two-thirds of asset managers view a soft landing as the most likely scenario for the economy over the next 12 months, while just 11% expect a hard landing.

Fed maintains optimism

The March Federal Reserve meeting, which confirmed expectations of three interest rate cuts during the year while improving the economic outlook, added confidence to investors.

Overcoming rising bond yields

The stock has successfully weathered the rise in Treasury yields that previously weighed on stock prices heading into 2023. The yield on the 10-year Treasury note reached 4.2%, up from 3.86% at the end of last year.

Expanding the Boundaries of Optimism

BlackRock Investment Institute strategists say risk optimism could expand beyond the tech sector thanks to the integration of AI across industries, as well as support from the Federal Reserve and slowing inflation. This is pushing for more investment in US stocks.

Rising share prices reflect confidence

The forward price-to-earnings ratio for the S&P 500 reached 21, a two-year high and reflecting increased investor optimism in the stock market, according to LSEG Datastream.

Wind of change in the stock market

The stock market remains under the influence of large companies that dictated trends in 2023. However, the current year has brought diversity to growth dynamics, especially among the tech giants known as the "Magnificent Seven."

Artificial Intelligence Stars

Nvidia stands out, posting impressive growth of over 80% thanks to its role as a leader in AI chips. Meta Platforms is also showing notable success, increasing its value by 37% and paying dividends for the first time in February.

Tests for titans of technology

At the same time, not all major players are lucky. Apple faces an 11% loss as the company comes under pressure in China and from regulators. Tesla is also experiencing a 29% decline, driven by concerns about demand for electric vehicles.

Redistribution of influence

According to S&P Dow Jones Indices, the Magnificent Seven are responsible for 40% of the S&P 500's year-to-date gain, down significantly from last year, when they contributed more than 60%. This suggests the rally is expanding to other stocks, offsetting the current decline.

A look at inflation ahead of the holiday

Against the backdrop of the upcoming Good Friday celebration and the closure of US stock markets, analysts are eagerly awaiting the publication of the PCE index. The index, the Federal Reserve's preferred measure of inflation, will provide insight into the possible timing and extent of upcoming interest rate cuts.

Minor changes compared to expectations

The Dow Jones Industrial Average gained some ground, gaining 0.12%, while the S&P 500 also rose a modest 0.11%. In contrast, the Nasdaq Composite fell slightly by 0.12%, reflecting the market's mixed reaction to the current economic outlook.

Weekly and monthly achievements

Over the past week, the Dow Jones rose 0.84%, the S&P 500 rose 0.39%, and the Nasdaq rose 0.3%. March gains were notable, with the Dow Jones up 2.08%, the S&P 500 up 3.1% and the Nasdaq up 1.79%. This quarter was marked by significant gains for all three indexes: the Dow by 5.62%, the S&P 500 by 10.16%, and the Nasdaq by 9.11%.

Comment from the Fed confirms caution

Federal Reserve Chairman Christopher Waller noted that despite the disappointing inflation data, the Fed should show restraint in cutting short-term interest rates. However, he did not rule out the possibility of a rate cut later this year, emphasizing the readiness for further regulatory action in response to the economic situation.

Fed Interest Rate Forecasts

Market analysts assign a 64% chance that the Federal Reserve will cut interest rates by 25 basis points by June, based on an analysis of data from CME's FedWatch Tool.

Sectoral achievements and failures

Among key sectors, communications, energy and technology stood out as the best performers in the quarter, while the real estate sector faced losses. This distribution of indicators reflects the changing priorities and interests of investors in the market.

Expanding investment horizons

According to Anthony Saglimbene, chief market strategist at Ameriprise, the observed trends suggest that investors are starting to explore opportunities outside the dominance of big tech companies, anticipating lower interest rates later in the year.

Focus on the winners of the AI era

Investors are also cautiously optimistic about which companies stand to benefit most from the increased use of artificial intelligence, tailoring their investment strategies to upcoming technology trends.

AI boom attracts attention

Nvidia continues to lead the AI push, but excitement around the technology has also spread to other chipmakers such as Super Micro Computer and Arm Holdings. Astera Labs, another player in this arena, impressed the market by doubling its stock price from its initial public offering price in just a week.

Healthcare in Focus

Walgreens Boots shares rose sharply following its quarterly earnings report, where the company noted a 3.19% decline in the value of its investment in medical clinic operator VillageMD.

Strategic moves in retail

Home Depot shares fell slightly after announcing the largest acquisition in the company's history, the purchase of building materials supplier SRS Distribution for $18.25 billion. The move highlights the retailer's strategic efforts to expand its presence in the market.

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The main events by the morning: April 1

Sales of Russian gas for rubles brought the country an income of 2.3 trillion rubles. According to Eurostat and the UN Comtrade platform, Hungary, Italy, Greece and Slovakia became the main buyers of gas from Russia under the new conditions. However, some importing countries (e.g. Germany and Austria) hid information about their purchases of Russian gas.

China has expressed its readiness to hold a dialogue with Taiwan only if the latter recognizes the principle of «one China». This was stated by Chinese Ambassador to Russia Zhang Hanhui. He also noted that China highly appreciates Russia's support in the Taiwan issue. The problems between China and Taiwan began in 2016 after Taipei's refusal to recognize the 1992 Consensus.

China has maintained its leadership in chip imports for 22 years. In 2023, the country acquired chips worth $350 billion. Hong Kong has remained the leader in chip exports for the past 10 years. The largest increase in purchases over the past year has been observed in Albania – almost 4.4 thousand times.

Monetization will appear in Telegram. However, the new advertisements are not yet available in Russia, Ukraine, Palestine and Israel. Administrators will be able to receive 50% of the revenue from advertising in their channels. Payments will only be made in TON.

The Central Bank of Russia stated that there is no better option for storing reserves than the Chinese yuan. The bank also noted the increasing role and liquidity of the Chinese currency at the international level in recent years. Last year, the yuan replaced the US dollar as the most traded currency in Russia.

Microsoft and OpenAI plan to create a Stargate data center with an artificial intelligence supercomputer for $100 billion. Information about this appeared in the publication The Information with reference to three sources close to the project.
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Financial future on the horizon: US stocks rise ahead of consumer price news

On Tuesday, ahead of the release of key inflation data, the Nasdaq and S&P 500 indices showed moderate growth, despite a decline in the financial sector. This happened ahead of the reporting season for leading US banks, which begins on Friday.

The Nasdaq Composite, supported by strength in semiconductors, posted a notable gain, while the S&P 500 gained minimally. The Dow Jones Industrial Average closed almost unchanged.

Investors were focused on Wednesday's consumer price index, which could have a significant impact on the Federal Reserve's interest rate adjustment decisions in light of recent positive economic data, including an impressive labor market report.

Among the large banks whose reports interested the market were JPMorgan Chase & Co, Wells Fargo & Co and Citigroup Inc, which are included in the S&P banking index and showed a decline in their activity in recent trading.

"Financial companies' first-quarter earnings typically set the pace for the entire season," said Bill Northey, who serves as senior director of investments at U.S. Bank Wealth Management in Billings, Montana. "We see cyclical sectors as a measure of the overall health of the corporate landscape in the United States."

Analysts predict that inflation will gradually decline toward the Federal Reserve's target level of 2%. However, the National Federation of Independent Business on Tuesday reported optimism among small businesses fell to an 11-year low in March, with inflation as the top concern.

"The decline in small business sentiment is a key signal," Green emphasized. "This is a repeat of the trend of recent years, where large companies feel confident, while small businesses experience significant difficulties."

The Dow Jones Industrial Average fell 9.13 points, or 0.02%, to close at 38883.67. The S&P 500 rose 7.52 points, or 0.14%, to finish at 5209.91, while the Nasdaq Composite rose 52.68 points, or 0.32%, to close at 16306.64.

Of the 11 key sectors in the S&P 500, nine posted gains, with real estate posting the biggest gains. The financial services sector showed the least dynamics.

According to the latest forecasts from LSEG, overall first-quarter earnings growth for S&P 500 companies is expected to reach 5% year over year, down from initial expectations of 7.2% at the start of the quarter.

Stocks related to cryptocurrencies and blockchain technology fell, reflecting the decline in the value of Bitcoin. In particular, shares of Coinbase Global and software developer MicroStrategy lost 5.5% and 4.8%, respectively.

Moderna stock stood out, however, rising 6.2% after announcing positive results from an early-stage trial of a customized cancer vaccine developed with Merck.

Alphabet Inc shares also rose 1.1%, moving the company closer to the significant milestone of a $2 trillion market capitalization.

On the New York Stock Exchange, advancers outnumbered decliners by a 1.44-to-1 ratio. On the Nasdaq, advancers outnumbered decliners by a 1.33-to-1 ratio.

Oil prices fell for the second day in a row as negotiations to reach a truce in Gaza continue, encountering obstacles from Egyptian and Qatari mediators. On Monday, Brent oil prices fell for the first time in the last five trading sessions, while the price of American oil fell for the first time in the last seven days.

The US dollar is showing stability amid investors' anticipation of the upcoming US inflation data expected on Wednesday. Meanwhile, the Japanese yen remains near its multi-year lows, prompting vigilance among traders about possible moves by Japan to stabilize the currency.

Those expectations bode well for the big banks' first quarterly earnings reports on Friday.

"We are on the verge of important inflation data and financial reports. Some investors may choose to adopt a more conservative strategy ahead of these key events," said Jeff Kleintop, chief global investment strategist at Schwab.

"Despite the stock market's strong first quarter performance, the question remains whether earnings were strong enough to support this development, and whether guidance from business leaders will be able to confirm the more confident growth expectations that the market has already priced in?"

At the beginning of the trading day, the shares showed growth, but then the dynamics weakened, and by the close of trading, some of them were able to partially recover lost positions.

Gene Goldman, chief investment officer at Cetera Investment Management, said: "With current high valuations and questions about the Federal Reserve's rate plans, markets are reflecting the situation with perfect accuracy. Any higher-than-expected CPI reading could make it difficult to be optimistic about a Fed rate cut."

The MSCI global equity index rose 1.32 points, or 0.17%, to 779.36, recovering from an earlier decline of about 0.5%.

Europe's STOXX 600 index fell 0.61% as investors awaited a policy statement from the European Central Bank on Thursday, paying particular attention to any comments from President Christine Lagarde about a possible rate cut in June.

US Treasury yields fell in anticipation of the release of US inflation data.

Expectations for a rate cut in the US have weakened amid continued economic activity. Markets place the likelihood of a 25 basis point rate cut in June at about 56%, down from 61.5% last week, according to analysis from CME Group's FedWatch tool.

The 10-year U.S. Treasury yield fell 6.6 basis points to 4.358%, down from 4.424% at the end of the previous day, while the 30-year yield fell 5.7 basis points to 4.4964%. with 4.553%.

The yield on two-year U.S. Treasury notes, which often reacts to changes in interest rate expectations, eased 5.1 basis points, falling to 4.7384% from 4.789% late Monday.

The foreign exchange market was little changed, with the US dollar index down 0.02% at 104.09, while the euro weakened 0.01% at $1.0857. Against the Japanese yen, the dollar lost 0.03% to settle at 151.74.

Japanese Finance Minister Shunichi Suzuki stressed the country is open to all options to deal with the yen's excessive fluctuations, reiterating its readiness to act in response to the currency's recent sharp decline.

In energy, despite ongoing instability in the Middle East, the US Energy Information Administration (EIA) has adjusted upward its forecasts for US crude oil production for the current and next years, and also raised its forecasts for global and domestic oil prices .

US oil prices fell 1.39%, or $1.20, to $85.23 per barrel. At the same time, Brent crude oil prices fell 1.06%, or $0.96, to trade at $89.42 per barrel.

Analysts said the spot price of gold hit a new record for eight straight sessions, supported by strong buying by central banks and rising geopolitical instability.

The price of spot gold increased by 0.57%, reaching $2,352.23 per ounce. At the same time, gold futures in the US showed an increase of 0.84%, settling at $2,351.40 per ounce.

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CRASH ON WALL STREET: INFLATION VS. RATE CUT

On Wednesday, American stock markets experienced a decline, reaching minimum closing levels against the backdrop of published inflation data, which exceeded experts' expectations. The figures dampened investor optimism that the US Federal Reserve could begin cutting interest rates by the summer.

The publication of the US Department of Labor's report on the consumer price index (CPI), which showed results worse than expected, caused an immediate negative reaction in the markets. Major US stock indexes fell sharply into the red as trading began, highlighting the difficulty of getting inflation back to the Fed's 2% target.

Ryan Detrick, lead market analyst at Carson Group, noted that the surprise inflation data led to a "sell first, ask questions later" strategy. This in turn cast doubt not only on the timing of the first rate cut, but also on the size of the upcoming cut.

Concerns outlined in the minutes of the Fed's March meeting indicate a possible stagnation of inflation towards the target level, which may require the extension of tight monetary policy beyond the expected period.

U.S. Treasury yields jumped while stock indexes felt pressured to decline after reporting higher-than-expected growth in consumer prices in March. This event reduced confidence in how quickly and to what extent the Federal Reserve could cut interest rates.

In the foreign exchange market, the US dollar index strengthened in response to the release of data, and the dollar against the Japanese yen reached its highest level since 1990. Investors are closely monitoring the possible reaction of the Japanese authorities, who may take steps to stabilize the yen.

A report from the U.S. Bureau of Labor Statistics recorded a 0.4% rise in the consumer price index last month, mirroring February's trend, due in large part to increases in gasoline and housing costs. This resulted in an annual growth index of 3.5%, compared with economists' forecasts for 0.3% monthly growth and 3.4% annual growth.

These indicators significantly changed the mood of traders, significantly reducing expectations for the Federal Reserve to cut interest rates in June from 62% to 17%. In addition, the likelihood of a July rate cut was also revised down from 76% to 41%, according to data from CME Group's FedWatch tool.

Michael Hans, chief investment officer at Citizens Private Wealth, emphasizes that the current environment remains uncertain and challenging for the Federal Reserve, which has yet to declare victory over inflation.

"The Fed would prefer to rely on additional data to support its confidence in achieving its 2% inflation target," he says. He said the current situation requires a continuation of a cautious strategy, especially as recent data has prompted a revision of expectations regarding the timing of a potential interest rate cut.

Elevated yields on major US government bonds, which topped the 4.5% threshold and reached their highest since last November, put further pressure on stock prices. Sectors most sensitive to changes in interest rates were particularly affected, with the real estate market recording its largest daily decline since June 2022.

Housing stocks posted their biggest daily decline since Jan. 23, while the small-cap Russell 2000 index posted its biggest daily decline since Feb. 13.

Ryan Detrick noted that "the sectors most exposed to interest rates, including real estate, homebuilding and small-cap companies, experienced significant losses today."

The likelihood of the Fed cutting interest rates by 25 basis points in June fell to 16.5% from 56% just before the report, according to CME Group's FedWatch tool.

The Dow Jones Industrial Average lost 422.16 points, down 1.09%, to 38,461.51. The S&P 500 fell 49.27 points (down 0.95%) to 5,160.64 and the Nasdaq composite fell 136.28 points (down 0.84%) to 16,170.36.

Among the eleven key sectors of the S&P 500 index, all but energy ended the trading day in the red, with real estate posting the biggest decline.

Investors' eyes are now on Thursday's upcoming producer price report, which will provide a clearer picture of inflation in March, as well as the unofficial start of quarterly earnings season.

A new round of reporting begins on Friday when financial giants such as JPMorgan Chase & Co, Citigroup Inc, and Wells Fargo & Co report their financial results.

Analysts expect overall first-quarter S&P 500 earnings to rise 5.0% year-over-year, a notable decline from the 7.2% growth forecast at the start of January, according to LSEG.

Megacorporations in the growth sector were mostly down, but Nvidia Inc was the exception, rising 2.0%.

US shares of Alibaba also saw a 2.2% gain after Jack Ma, the company's co-founder, addressed a memo to employees in which he supported plans to restructure the Internet giant. It's a rare message from a businessman who has stayed out of the public eye in recent years.

On the New York Stock Exchange (NYSE), decliners far outnumbered advancers by a ratio of 5.93 to 1. A similar trend was seen on the Nasdaq, where for every gainer, 3.58 falling stocks.

MSCI's global equity index fell 6.91 points, or 0.89%, to 772.32.

While Europe's STOXX 600 index ended modestly up 0.15%, investors' eyes are on the upcoming European Central Bank meeting on Thursday. Forecasts say the bank is likely to keep its current interest rate unchanged, despite earlier hints of a possible rate cut in June.

In the government bond sector, the 10-year US Treasury yield surged above 10 basis points to reach its highest since mid-November following the inflation data. The 10-year U.S. Treasury yield jumped 18 basis points to 4.546% and the 30-year Treasury yield jumped 12.8 basis points to 4.6273%.

The 2-year yield, closely linked to interest rate expectations, rose 22.2 basis points to 4.9688%, hitting its highest since mid-November.

In the foreign exchange market, the US dollar strengthened its position, rising 1.04% to 105.17, while the euro fell 1.04% to $1.0742. Against the Japanese yen, the US dollar rose 0.77% to 152.94.

Oil prices also saw gains, with U.S. crude rising 1.15%, or 98 cents, to $86.21 a barrel, while Brent rose 1.19%, or $1.06, to $90. .48 dollars per barrel.

Gold lost value as the dollar strengthened and Treasury yields rose following an update on inflation data. The spot gold price fell 0.91% to $2,331.12 an ounce, while U.S. gold futures fell 0.58% to $2,329.90 an ounce.

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Trading Signals for GOLD (XAU/USD) for April 16-18, 2024: sell below $2,390 (21 SMA - 61.8% Fibonacci)

Yesterday during the American session, gold reached a low of 2,325, the level that coincided with the 200 EMA and from that area, it gained a strong bullish momentum, jumping by more than $50 in less than 24 hours.

From the all-time high at 2,431 to the April 15 low (2,324), gold has retraced the 61.8% Fibonacci which coincides around 2,390.

If gold trades below 2,392 in the next few hours, we could look for opportunities to sell with the target at 2,364 (21 SMA). With a consolidation below the 21 SMA, we could expect a further bearish move and gold could fall to the 200 EMA at 2,331.

In case gold continues to rise, the bearish outlook will be invalidated and we could look for opportunities to buy above the psychological level of 2,400. If this scenario occurs and gold consolidates above 2,396, the price is likely to reach 2,410 and could finally reach 2,435 (7/8 Murray).

Technically, the eagle indicator is giving a negative signal and there will likely be a technical correction in the next few hours, so we will look to sell below 2,392 with the target at 2,330.

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Hot forecast for EUR/USD on April 18, 2024

In the absence of economic reports or other news that could affect the market, investors finally paid attention to the dollar's overbought condition. So, there was nothing to prevent the local correction, which, by the way, is still far from over. The market imbalances, although reduced, have not disappeared altogether. And except for the data on unemployment claims in the United States, today's economic calendar is empty. And with the US dollar still overbought, these reports are not particularly important. Moreover, claims are expected to increase by 4,000, and that's incredibly small. So we can basically say that nothing will change. Such minor changes are not capable of influencing investor sentiment. In other words, the pair will likely correct higher on Thursday.

The EUR/USD pair has started a long-awaited corrective movement. The support level at 1.0600 played a role, which the quote recently approached.

The RSI has left the oversold zone on the 4-hour chart, and it has upwardly crossed the 50 moving average. This indicates an increase in the volume of long positions in the euro.

On the same time frame, two out of three of the Alligator's MAs are intertwined, corresponding to a sign of a slowdown in the downtrend cycle.

Outlook
Considering the extent of the euro's weakness, we can assume that there is still room for more movement. For this reason, the pair is expected to rise to the level of 1.0700.

Complex indicator analysis indicates a downward cycle in the short- and long-term timeframes.

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Gold edges lower as Middle East tensions ease

The yellow metal continues to decline, plunging investors into gloom and prompting them to reassess their trading strategies. However, some analysts are confident that the precious metal will rebound in the near future, viewing its decline as a natural step before another rally. The optimism of experts bolsters investors, although some market players remain skeptical about the near-term prospects of gold.

On Monday, April 22, the precious metal sharply fell amid reduced geopolitical risks and decreased demand for safe-haven assets. As a result, gold lost more than 2.7%. According to estimates, gold's decline at the end of the day was the most significant since June 2022.

The metal depreciated amid easing tensions in the Middle East. Such a development reduced the risk premium in the market. At the moment, gold continues to trade downwards after the sharpest decline in two years.

The catalyst for the current downtrend in the precious metal was the de-escalation of the conflict between Israel and Iran. Against this backdrop, many experts are pessimistic about the near-term prospects of gold. They believe that investors will turn to other sources of capital preservation. According to some specialists, prices for the precious metal may break below the $2,300 per ounce level and then plummet to $2,200 per ounce. Analysts recommend preparing for a significant decline in the yellow metal amid extremely overbought conditions, as indicated by the RSI on the daily chart.

Currency strategists at ABN AMRO Bank have maintained their forecast, according to which gold will lose heavy losses, diving to $2,000 per ounce by the end of 2024. The bank's specialists cite excessively high current prices, dollar strengthening, liquidation of assets in gold ETFs, and the absence of a physical gold shortage in the global market as reasons.

The current drop in the yellow metal (by more than 2.7%) is considered by experts to be the most significant in the last two years. Gold futures quotes on the New York Comex exchange plummeted to $2,346.4 per ounce at the end of Monday's trading, reaching the lowest level since April 5, 2024. On Tuesday, April 23, the precious metal declined by 0.85% and then fell by another 1.3%. Currently, gold is trading at the level of $2,316.45 per ounce.

The precious metal was also weighed down by the high likelihood that the Federal Reserve would maintain a tight monetary policy much longer than expected in early 2024. The focus of market attention is on the publication of the key inflation indicator in the United States - the Core Personal Consumption Expenditures Price Index, which the regulator pays special attention to when assessing risks. The release of this report is scheduled for Friday, April 26. According to preliminary forecasts, the indicator decreased to 2.6% year-on-year in March. Recall that its February value was 2.8% year-on-year.

Many investors are counting on some easing of geopolitical tensions. At the same time, market participants are switching to riskier assets such as stocks. According to CFTC data, the volume of major market players' long positions in gold futures and options is at a four-year high. The reason for profit-taking was the fairly rapid decline in the value of the precious metal. In addition, in recent months, gold has appreciated despite a steep rally in the greenback. In the current situation, the risks of a deep correction in the precious metal are increasing.

However, according to some analysts, there are favorable factors contributing to further gans in gold. Tailwinds for the yellow metal will be the US Federal Reserve's rate cuts, global instability, and the growing US government debt. Against this backdrop, even economists at Bank of America, who are skeptical about the prospects of the precious metal, expect its price to rise to $3,000 by 2025. Analysts at Citi Bank are also bullish on gold, expecting it to gain in the next 6–18 months. Many investors adhere to this position, asserting that the likely record of $3,000 per ounce will be surpassed in a couple of years.

Improvement in forecasts for gold prices in 2024 boosts investor optimism. It is worth noting that these forecasts anticipate an increase in the value of the metal in the near future. Confidence in such a scenario allows market players to weather the current market woes and prepare for an upcoming rise in gold.

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Weekly forecast based on simplified wave analysis of EUR/USD, USD/JPY, GBP/JPY, USD/CAD, NZD/USD, and Gold on May 6th

EUR/USD

Analysis:
The weekly chart scale of the major European currency pair shows that the dominant descending wave of recent months is nearing completion. The wave structure appears to be formed. The unfinished segment in the upward direction dates back to April 16.

Forecast:
We expect to see a general sideways movement in the euro's price in the upcoming week. One should expect an increase towards the calculated resistance zone in the coming days. Subsequently, there is a high probability of transitioning into a drift, followed by a further price decline. The greatest volatility is expected towards the end of the week.

Potential reversal zones

Resistance:
1.0870/1.0920
Support:
1.0620/1.0570

Recommendations:
Buying: Small volume purchases within the "intraday" framework can be profitable for the deposit.
Selling: Without confirmed reversal signals near the resistance zone, conditions for such transactions do not exist.

USD/JPY

Analysis:
Over the past year, the dominant upward wave of the main Japanese yen pair has been completed. The descending wave zigzag initiated on April 29 possesses reversal potential. Its structure began forming the middle part (B) at the end of last week. Quotes reached the lower boundary of the potential reversal zone on the H4 timeframe.

Forecast:
At the beginning of the upcoming week, there is a high probability of price movement within the corridor between the nearest counter zones. A transition to sideways drift is expected after possible pressure on the support zone. Towards the end of the week, one can expect a resumption of price growth towards the resistance boundaries.

Potential reversal zones
Resistance:
154.70/155.20
Support:
151.60/151.10

Recommendations:
Selling: Carries increased risk and may lead to losses for your deposit. Refraining from trading until the upcoming upward correction is completed is optimal.
Buying: Becomes possible after the appearance of reversal signals from your trading systems near the resistance zone.

GBP/JPY

Analysis:
The direction of movement of the British pound/Japanese yen pair since the end of September 2022 is determined by an ascending wave. On the weekly timeframe, it completes a larger ascending wave structure. The descending segment since April 29 possesses reversal potential and may mark the beginning of a correction of the main wave.

Forecast:
In the coming days, the flat character of the movement is expected to continue. A short-term increase in quotes to the resistance zone is not excluded. In the following days, an increase in volatility, a reversal, and a resumption of price decline are expected. A brief breach of the upper resistance boundary is possible upon course change.

Potential reversal zones
Resistance:
193.80/194.30
Support:
188.70/188.20

Recommendations:
Buying: It is suggested that the main attention be devoted to finding buy signals near the support zone.
Selling: It may become risky and not recommended in the coming days.

USD/CAD

Analysis:
The direction of movement of the Canadian dollar in the main pair since the end of December last year is determined by an ascending wave. The price has reached the boundaries of the wide potential reversal zone in the weekly timeframe. Since the middle of last month, pair quotes have predominantly moved sideways, forming a correction. The wave structure needs to be completed.

Forecast:
The most probable scenario for price movement in the coming days will be a gradual shifting sideways between the nearest counter zones. After a bounce in price towards the upper boundary of the channel, a decline in quotes towards the support area is expected.

Potential reversal zones
Resistance:
1.3730/1.3780
Support:
1.3580/1.3530

Recommendations:
Buying: High risk and may lead to losses.
Selling: Fractional volumes may be used within individual trading sessions.

NZD/USD

Brief analysis:
The unfinished wave structure of the New Zealand dollar chart is directed southward. It dates back to the end of December last year. The middle part (B) continues to form within the wave structure, resembling a horizontal plane. The resistance boundary runs along the lower boundary of a strong potential reversal zone of the large timeframe.

Weekly forecast:
During the upcoming week, gradual movement towards the resistance zone is expected. After reaching the calculated resistance zone, there is a high probability of a downward correction to the support zone.

Potential reversal zones
Resistance:
0.6100/0.6150
Support:
0.5970/0.5920

Recommendations:
Buying: Has limited potential and may be used for scalping.
Selling: After confirmed reversal signals appear near the support zone, it may become the main direction for trading this pair.

Gold

Analysis:
In the gold chart, the direction of short-term trends over the past year is determined by an ascending wave algorithm. Since mid-April, the wave has been correcting, forming an elongated plane. At the time of analysis, it does not appear complete, moving sideways flat along the calculated support zone.

Forecast:
In the coming days, the pair's price should complete the movement's correction phase. A subsequent reversal and price increase towards the resistance zone can be expected by the end of the upcoming week. Breaking out of the indicated price corridor is possible but unlikely.

Potential reversal zones
Resistance:
2360.0/2375.0
Support:
2290.0/2275.0

Recommendations:
Buying: Becomes possible after suitable signals appear near the support zone.
Selling: Conditions for such transactions will arise after confirmed signals appear near the resistance zone.

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Growth continues: Wall Street in green for third day in a row

American stock indices ended trading higher on Monday, marking their third consecutive positive session. Investors are once again raising hopes that the Federal Reserve may cut interest rates this year.

Global stock indicators also rose amid optimism about a likely rate cut. At the same time, the Japanese yen weakened against the dollar after a sharp rise last week associated with the proposed currency intervention.

Expectations for US central bank rate cuts fell during the year due to more persistent inflation. Some investors began to fear that a rate cut would not materialize at all, sending markets tumbling in April.

However, Friday's data showed that U.S. job growth slowed more than expected in April. That eased pressure on the Federal Reserve, making it less likely that rates would remain high for long. Combined with an unexpectedly positive corporate earnings season, this has given investors fresh momentum in recent sessions.

Last week, the Fed signaled it was willing to consider cutting interest rates but wanted to make sure inflation was falling sustainably before making that decision. Fed officials repeated that statement Monday.

Richmond Fed President Thomas Barkin said the current level of interest rates should slow the economy enough to bring inflation back to the central bank's 2% target. However, a strong labor market provides time to wait.

Traders now expect the Fed to cut rates by 46 basis points by the end of 2024, with the first cut forecast in September or November, according to rate probability app LSEG.

Stocks on both sides of the Atlantic, as well as in Asia, rose. The US labor market report on Friday was softer than expected, leading to renewed bets that the Federal Reserve will ease monetary policy as early as September.

The dollar index, which measures the US currency's exchange rate against six major trading partners, fell for the fourth session in a row. It comes after Friday's data showed the weakest job growth since October, allaying fears that the Fed could raise rates again.

However, the outlook for inflation remains uncertain as the market hopes interest rates will be restrictive enough to slow the economy and reduce the rate of price increases, Conger said.

The Dow Jones Industrial Average rose 176.59 points, or 0.46%, to 38,852.27. The S&P 500 added 52.95 points, or 1.03%, to 5,180.74. The Nasdaq Composite Index rose 192.92 points, or 1.19%, to 16,349.25.

Most sectors of the S&P 500 index ended trading on a positive note. The energy sector was one of the top gainers, thanks in part to U.S. natural gas futures hitting their highest level in 14 weeks.

Chipmaker shares were broadly higher on Monday, including Arm Holdings, which added 5.2% ahead of this week's earnings release.

Micron Technology (MU.O) shares rose 4.7% after Baird upgraded the stock. Advanced Micro Devices (AMD.O) and Super Micro Computer (SMCI.O) also rose 3.4% and 6.1%, respectively, regaining ground lost after last week's disappointing earnings.

Paramount Global (PARA.O) shares rose 3.1% after exclusive talks with Skydance Media ended without a deal, allowing a special committee to consider offers from other bidders.

Tyson Foods (TSN.N) shares fell 5.7% despite beating Wall Street's second-quarter profit expectations as the company warned of pressure on consumers from persistent inflation.

At the same time, shares of Spirit Airlines (SAVE.N) fell 9.7% to a record low after weak guidance for second-quarter earnings.

The S&P 500 posted 29 new 52-week highs and 2 new lows, while the Nasdaq recorded 150 new highs and 54 new lows.

In Europe, the cross-regional STOXX 600 index (.STOXX) rose 0.53%. It comes amid signs the European Central Bank is confident of cutting rates as euro zone inflation continues to slow, three ECB policy makers said.

Philip Lane, Gediminas Simkus and Boris Vujicic said inflation and growth data supported their belief that eurozone inflation, which stood at 2.4% in April, would fall to the central bank's 2% target by the middle of next year. of the year.

The MSCI World Shares Index (.MIWD00000PUS) rose 0.50% to close at 1,066.73, its highest level since June 2022. Markets in the UK and Japan were closed due to holidays.

The dollar index was down 0.07% at 105.10, lifting the euro 0.07% to $1.0766.

Goldman Sachs raised its 2024 earnings per share growth forecast for companies in the STOXX 600 Index (.STOXX) to 6% from 3%. The bank noted that a 10% annual rise in Brent oil prices adds about 2.5 percentage points to annual earnings per share growth, and a 10% decline in the euro/dollar exchange rate adds about the same.

Treasury yields fell as investors weighed in on sluggish job creation last week, bolstering views that the U.S. economy is not overheated and will not be hampered by rate cuts.

The yield on the 10-year U.S. Treasury note fell 1.3 basis points to 4.487% from 4.5% late Friday.

Traders now expect the Fed to cut rates by 43 basis points by year-end, with the first cut likely to come in September, according to rate probability app LSEG. Traders have cut their expectations to one cut in recent weeks due to signs of persistent inflation.

Oil prices rose after Saudi Arabia raised June crude oil prices for most regions. In addition, the unlikely prospect of a quick ceasefire in the Gaza Strip has revived fears of renewed fighting between Hamas and Israeli forces.

U.S. crude rose 37 cents to $78.48 a barrel and Brent crude rose 37 cents to $83.33 a barrel.

MSCI's index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) hit its highest level since February 2023, adding 0.66%, while the blue-chip China index (.CSI300) rose 1.5%.

Hong Kong's Hang Seng Index (.HSI) rose 4.7% last week, posting its longest daily winning streak since 2018. The index closed 0.55% higher on Monday.

Elsewhere, traders remain wary of potential yen volatility following past suspicions that Japanese authorities would intervene to stem the currency's sharp decline.

Tokyo is believed to have spent more than 9 trillion yen ($59 billion) to prop up its currency last week, pushing the yen from a 34-year low of 160.245 to about a one-month high of 151.86 per dollar, according to the Bank of Japan. within a week.

On Monday, the yen gave up some of its ground and was last trading at 153.95 per dollar, representing a decline of 0.63%.

Gold prices rose amid a weakening dollar. US gold futures for June delivery rose 0.9% to $2,331.20 an ounce.

Bitcoin added 0.65% to $63,343.00, while Ethereum was down 1.2% to $3,077.3.

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Trading Signals for GOLD (XAU/USD) for May 8-10, 2024: buy above $2,312 (21 SMA - symmetrical triangle)

Early in the European session, gold is trading around 2,310.68 forming a bearish bullish pennant pattern on the H4 chart.

Gold has been trading within a symmetrical triangle pattern formed since April 12. We believe that if there is a sharp break above 2,312 and consolidation above this area on the daily chart, gold could continue its rise and could reach 6/ 8 Murray at 2,375 and finally, 7/8 Murray around 2,437.

On April 18, gold left a GAP at about 2,392. If an upward movement occurs in the next few days and if gold consolidates above 2,375, the instrument could cover this GAP and even reach the psychological level of 2,400.

On the contrary, if gold falls and consolidates below the 21 SMA located at 2,312 and below 5/8 Murray, we could expect it to reach the 200 EMA located at 2,295. The price could reach the bottom of the symmetrical triangle pattern around of 2,270.

Since the beginning of May, the eagle indicator has been showing a positive signal and we believe that an upward movement in gold could occur in the coming days. For this scenario to be confirmed, we must wait for the double break of the bullish flag and symmetrical triangle pattern.

If this scenario comes true, it will be seen as an opportunity to buy. On the contrary, we could continue selling below 2,310.

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Trading Signals for XAU/USD (GOLD) for May 14-16, 2024: buy above $2,342 (21 SMA - rebound)

Gold is trading around 2,343, around the 21 SMA, and within the uptrend channel forming since early May. Gold, after a strong technical correction below 2,375, found a bottom around 2,330 which gave it an opportunity to recover.

The H4 chart shows that gold could resume its bullish cycle if it consolidates above 2,340 or 2,330 in the coming days.

If gold keeps its uptrend channel intact, a technical bounce around 2,330 would be a key point to buy with targets at 2,375 and 2,392. At this level, gold left a GAP on April 18 and the price is likely to reach this area so the GAP will be covered in the next few days.

If gold breaks and consolidates below 2,330, the outlook could be negative and we could expect a change in trend. Therefore, gold could reach 5/8 Murray located at 2,312 and the 200 EMA located at 2,301.

We believe that in the next few hours, gold could gain momentum and we can look for opportunities to buy, only if it settles above 2,330. Any pullback in the price will be seen as an opportunity to buy with targets at 2,355, 2,375, and 2,392.

On May 10, the eagle indicator reached the oversold zone and we believe that gold could resume its bullish cycle as we see a relief in the bearish pressure so that gold could continue to rise.

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Powell reassures investors: Nasdaq closes at record high, with focus on price index

The Nasdaq hit a new all-time high on Tuesday amid the close, while the S&P 500 and Dow also posted gains as comments from Federal Reserve Chairman Jerome Powell reassured investors ahead of a major consumer inflation report expected on Wednesday.

Producer prices in the US rose more than expected in April, especially due to significant increases in prices for services and goods, which forced investors to reconsider expectations for a reduction in interest rates in September.

However, speaking on Tuesday, Powell characterized the latest PPI data as mixed rather than an indication that the economy is warming, taking into account downward revisions to data from the previous period as well.

Powell's comment that he doesn't expect any near-term interest rate hikes despite recent data on high inflation also added to investor optimism.

"The market is now more confident in high rates over the long term. Much of the discussion has centered on the possibility of rate hikes, and Powell emphasized that this is not currently on the table," said Lindsey Bell, chief strategist at Charlotte, North Carolina-based 248 Ventures. She also noted that the rise in stocks was observed against the backdrop of falling Treasury yields.

"The bond market seems to be adapting and the stock market is responding to the bond market," Bell added.

However, ahead of Wednesday, investors were cautiously awaiting consumer price index data to see whether the surprise growth recorded in the first quarter and April would continue.

Persistent inflation and a stable labor market have prompted a revision of expectations for the Federal Reserve's initial rate cut from March to September.

However, the stock market has posted strong gains this year on the back of strong, better-than-expected quarterly earnings and the prospect of a possible rate cut by the Federal Reserve.

While the tech-heavy Nasdaq index made a strong run to its record set on April 11, the S&P 500 ended the trading day 0.1% below its closing high on March 28. Likewise, the Dow Jones closed at less than 1% of its record high, also reached on March 28.

The Dow Jones Industrial Average rose 126.60 points, or 0.32%, to 39,558.11. The S&P 500 added 25.26 points, or 0.48%, to 5,246.68, while the Nasdaq Composite rose 122.94 points, or 0.75%, to 16,511.18.

Among the 11 key industrial sectors in the S&P index, consumer staples posted the biggest decline, losing 0.2%, while the technology sector led gains, adding 0.9%.

Alphabet (GOOGL.O) shares rose 0.7% after Google showed off innovations in its use of artificial intelligence, including an update to its Gemini chatbot and improvements to its search engine.

Home Depot (HD.N) shares closed down 0.1% after falling more than 2% on the day. The decline followed the retailer's quarterly report, which showed an unexpected decline in same-store sales as consumers switched to smaller home projects and cut spending on big-ticket items.

Alibaba's US-traded shares fell 6% after announcing an 86% drop in fourth-quarter profit.

Shares of athletic footwear maker On Holding jumped 18.3% after the company raised its full-year sales forecast ahead of quarterly expectations thanks to strong demand for its sneakers.

US President Joe Biden has announced steep tariff increases on imports of a range of Chinese goods, including electric vehicles, computer chips and medical products.

Shares of Chinese electric vehicle maker Li Auto, also listed in the U.S., fell more than 2%, while shares of Tesla (TSLA.O) rose more than 3%.

AMC Entertainment (AMC.N) shares soared nearly 32% to $6.85, while Koss Corp (KOSS.O) shares rose 40.7% to $6.15, among other stocks popular during the 2021 meme rally. year and shares in a short position.

On the New York Stock Exchange (NYSE), AMC and GameStop were the most actively traded stocks, with advancers outnumbering decliners 2.43 to 1, with 358 new highs and 31 new lows.

Asian stock markets were higher on Wednesday, while the US dollar weakened as investors digested mixed US producer price data and awaited a key consumer price report that could have a significant impact on the Federal Reserve's near-term monetary policy.

MSCI's broad index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.38% to hit a new 15-month high during the trading session. Japan's Nikkei (.N225) rose 0.58%.

The latest data showed U.S. producer prices rose more than expected in April, indicating persistent inflation at the start of the second quarter.

Shares of GameStop (GME.N) and AMC (AMC.N), popular among retail investors, jumped significantly after messages from Keith Gill, known as "Growling Kitten", leading to discussions about the possible return of a key figure of the 2021 meme rally.

In the Chinese market, stocks started the day lower, with the blue-chip index .CSI300 down 0.16% and the Hang Seng Index .HSI in Hong Kong down 0.22%.

US President Joe Biden announced significant tariff hikes on some Chinese imports, including electric vehicles, computer chips and medical products.

In currency markets, the dollar continued to slide as investors held back action ahead of consumer price index data, while the euro neared its one-month high, last trading at $1.0817.

The US Dollar Index, which measures the value of the US currency against a basket of six major currencies, was seen at 105.01. The yen traded at 156.36 per dollar, having hit a two-week low of 156.80 on Tuesday, raising fears of new currency interventions by Japanese regulators.

On April 29, the yen fell to a 34-year low of 160.245 per dollar, followed by aggressive yen buying that traders and analysts speculated was carried out by the Bank of Japan and the Japanese Ministry of Finance.

Commodity prices rose in response to the threat of major wildfires in Canada's oil sands and ahead of expected declines in U.S. crude oil and gasoline inventories later in the day.

The US WTI crude oil price rose 0.4% to $82.71 a barrel, while Brent crude rose 0.5% to $78.39 a barrel. The spot price of gold remained virtually unchanged at $2,356.79 per ounce.

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USD loses its downward momentum

Today, the dollar index is trying to limit the falls of the last few days and is above 104.2. The EUR/USD exchange rate approached the 1.0900 mark.

This is more of an emotional outburst. The markets are evaluating the new inflation figures in the US. Already today, emotions should subside, as traders will start analyzing the situation with a cool head.

After the inflation publication, the head of the Federal Reserve Bank of Minneapolis confirmed that it will probably be necessary to keep the rate at the current level for some more time and expressed doubts about how much it is holding the US economy back.

Experts at the Bank of America remain in the same position, believing that the first rate cut will not occur until December. To cut the rate in September, it is necessary that inflation slows further or labor market data weaken even more.

Still, the yield on 10-year US Treasury bonds fell to 4.32% on Wednesday, the lowest level since early April, as softer inflation data gives the Fed more flexibility to cut rates this year.

The dollar index has weakened over the past few days. The DXY is now near the price lows of April (103.95), which is the nearest support level. Perhaps within this range, the dollar's weakening will temporarily slow down. At least that is the picture we see now.

When will the Fed cut rates?

The main question is when the Fed will lower interest rates. This is of interest to analysts and financial market observers. According to analysis and forecasts, the likely month to start cutting rates is still September, as key elements of US inflation have started to show declines.

DNB Markets writes that they believed that current data would not change the likelihood of a rate cut in the autumn, provided inflation data remained moderate and labor market conditions continued to improve. Their forecasts indicate that the market expects the first rate cut in September.

According to inflation data released on Wednesday, overnight index swaps, which reflect traders' expectations of future interest rates, show that the market now fully appreciates the likelihood of a rate cut in September.

Two weeks ago, the first cut was not expected until December.

In 2024, expectations for a Fed rate cut have fallen significantly due to higher inflation in the first quarter of the year. Signals have emerged that some elements of the inflation basket will resist a change.

This boosted US bond yields and the US dollar in currency markets. Such a situation could happen again.

Until core inflation (excluding housing costs) and housing costs decline, the overall inflation rate will not be able to hold steady at the Fed's 2.0% target.

Housing costs, which account for about 40% of the overall consumer price index, have risen as a result of steady increases in home prices and rents in recent years.

However, PNC Bank says the April 2024 consumer price report may bring some relief to Fed policymakers, as the most stable housing and core services segments of the CPI showed the first signs of softening in a long time.

The core CPI declined to 0.2% month-over-month, and house price growth was just +0.2% month-over-month, the lowest since January 2021 (+0.6%).

PNC's forecast of two 25-basis-point rate cuts this year, in September and December, now seems more reasonable than earlier in 2024.

Other analysts are expressing a similar view. Berenberg believes the current inflation data makes it slightly more likely that the Fed will start cutting rates sooner.

"We continue to expect one 25-bp rate cut in December and three further such moves next year to bring the Fed funds target rate to 4.25–4.50%," Berenberg wrote.

Economists at Wells Fargo and Pantheon Macroeconomics also share this view. It takes some favorable inflation indicators for the Fed to feel confident about a rate cut. The first rate cut is possible at the FOMC meeting in September.

Pantheon Macroeconomics argues that the case for expecting a further slowdown in core inflation remains strong. Supply chains have stabilized, wage growth is slowing, and corporate margins remain strong, pointing to the outlook for the future.

Economists also note the lack of threat from global food and energy prices, as well as subdued rent growth and lower car prices. This indicates a slowdown in auto insurance inflation.

Thus, the stage is set for a further slowdown in the core CPI this summer, allowing the Fed to begin easing in September.

With the market consensus increasingly leaning toward a September rate cut, all eyes will be on upcoming macroeconomic data that could confirm these expectations.

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Wall Street Week: Key Events and Forecasts for the Days Ahead

At the end of the day on the New York Stock Exchange, the Dow Jones index increased by 0.34%, reaching a new record level, while the S&P 500 rose by 0.12%. The NASDAQ Composite Index, on the contrary, decreased by 0.07%.

Among the stocks included in the Dow Jones index, Caterpillar Inc (NYSE:CAT) stood out with a gain of 5.65 points (1.61%) to 356.37. JPMorgan Chase & Co (NYSE:JPM) shares rose 2.38 points (1.18%) to end at 204.85. Also worth noting is Boeing Co (NYSE:BA), whose shares rose 2.03 points (1.11%) to close the day at 184.99.

On the other hand, Amgen Inc (NASDAQ:AMGN) shares were down 2.25 points (0.71%) to end the day at 312.47. Intel Corporation (NASDAQ:INTC) rose 0.20 points (0.62%) to close at 31.83, while Verizon Communications Inc (NYSE:VZ) fell 0.20 points (0.50%). ), ending the session at 40.05.

Among the growth leaders among the components of the S&P 500 index are shares of Valero Energy Corporation (NYSE:VLO), which rose by 4.82%, reaching 166.14, shares of Freeport-McMoran Copper & Gold Inc (NYSE:FCX), which increased by 4 .25% to 54.25, and Chubb Ltd (NYSE:CB), up 3.60% to 274.43.

Meanwhile, Paramount Global Class B (NASDAQ:PARA) shares fell 4.91% to close at 12.02. Dollar Tree Inc (NASDAQ:DLTR) fell 3.29% to end the day at 117.31, while Lam Research Corp (NASDAQ:LRCX) fell 3.27% to finish at 912.07.

In Friday trading on the NASDAQ Composite stock exchange, shares of Fangdd Network Group Ltd (NASDAQ:DUO) showed significant growth, soaring by 309.76%, reaching a price of 1.68. Also, FLJ Group Ltd (NASDAQ:FLJ) rose 223.59% to finish the day at 1.55, and Jeffs Brands Ltd Unit (NASDAQ:JFBR) rose 109.03% to finish the day at 0. .65.

At the same time, Blue Star Foods Corp (NASDAQ:BSFC) saw a significant decline of 45.19% to close at 0.08. SINTX Technologies Inc (NASDAQ:SINT) shares fell 39.29% to close at 0.09. Heart Test Laboratories Inc Unit (NASDAQ:HSCS) fell 38.37% to close at 6.97.

On the New York Stock Exchange, the number of stocks whose prices increased (1,570) outnumbered the number of stocks that closed lower (1,256), while 85 stocks remained unchanged. On the NASDAQ stock exchange, the situation was less favorable: here shares of 1,790 companies lost value, 1,570 showed growth, and 125 remained at the same level.

Freeport-McMoran Copper & Gold Inc (NYSE:FCX) shares hit a new high, rising 4.25% or 2.21 points to finish the day at 54.25. Chubb Ltd (NYSE:CB) also set a record, rising 3.60% or 9.55 points to close at 274.43.

JPMorgan Chase & Co (NYSE:JPM) shares hit a high, rising 1.18% or 2.38 points to finish at 204.85. While Heart Test Laboratories Inc Unit (NASDAQ:HSCS) shares fell to a record low, losing 38.37% or 4.34 points to end the day at 6.97.

The CBOE Volatility Index, a measure of market expectations based on S&P 500 options trading, fell 3.46% to a three-year low of 11.99.

Gold futures for June delivery rose 1.46%, or 34.85, to $2.00 a troy ounce. WTI crude oil futures prices for June rose 0.95%, or 0.75, to close at $79.98 a barrel. Brent crude futures for July delivery rose 0.80%, or 0.67, to $83.94 a barrel.

On the Forex market, EUR/USD remained virtually unchanged, rising just 0.05% to hit 1.09, while USD/JPY rose 0.20% to hit 155.68.

The U.S. dollar index, which measures its value against a basket of foreign currencies, advanced slightly by 0.02% to close at 104.37.

Historical data indicates that the current recovery in the US stock market, which led to record highs this week, may continue into the future.

A slowdown in economic growth eased inflation concerns in May, spurring the three major US stock market indexes to hit all-time highs. The S&P 500, which lost more than 4% in April, is now up 11% year-to-date.

Market analysts who study historical data note that stocks tend to rise faster after corrections of comparable magnitude, and often continue to rise even after recovering lost ground.

Following this pattern, the current recovery could herald further gains in stock prices. After past 5% declines in the S&P 500, the subsequent average gain has been 17.4%, according to Keith Lerner, co-chief investment officer at Truist Advisory Services. At the close of trading on Friday, the index was already up nearly 7% from its April lows.

Investors are also expressing increased optimism about the economy's prospects for a so-called "soft landing" as well as forecasts for strong corporate profits, which could fuel further gains in stock prices.

Market activity will be tested on Wednesday when Nvidia (NVDA.O), whose shares have jumped on a wave of interest in artificial intelligence, reports its quarterly financial results.

Investors will also focus on durable goods data and consumer sentiment next week, expecting to see further evidence of slowing economic growth that could support the case for interest rate cuts this year.

Sam Stovall, chief investment strategist at CFRA, noted that momentum plays a significant role in determining how different market segments will perform post-recovery. He pointed out that the S&P 500 sectors that led during the market's post-correction recovery outperformed the overall market 68% of the time. Stovall analyzed 35 market advances since 1990.

Stovall's main takeaway is: "After recovering from a correction, it is important to allow your leaders to continue moving higher."

The most recent market recovery was led by the technology (.SPLRCT), utilities (.SPLRCU) and real estate (.SPLRCR) sectors, which posted gains of 11.3%, 10.1% and 7.9%, respectively.

Currently, all 11 S&P 500 sectors are ahead of their 200-day moving averages, said Willie Delwiche, an independent investment strategist and business professor at Lutheran College of Wisconsin.

Delwiche found that when at least nine sectors beat these trend indicators, the average annual return of the S&P 500 index reaches 13.5%.

However, a number of external factors can disrupt this growth. For example, despite recent data pointing to slowing inflation and tepid labor market growth, weak signs of a sustained cooling in the economy could reignite fears of an overheated economy, which could force the Federal Reserve to maintain high interest rates or even raise them.

Despite the positive economic signals, Federal Reserve officials are not yet inclined to change their plans to cut rates, which many investors expect to begin this year.

It's also worth noting that many stocks are highly valued, with the S&P 500 trading at a forward P/E ratio of 20.8, well above the historical average of 15.7, according to LSEG Datastream.

Banking strategists advise focusing on possible short-term sell-offs, given that ultimately the economic context will be decisive. They predict the S&P 500 could rise about 4% to 5,500 over the course of the year.

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Nasdaq records highs and S&P rises: All eyes on Nvidia

The Nasdaq hit record highs on Monday, while the S&P 500 posted modest gains as technology stocks advanced, ahead of Nvidia's results. The market also assessed the likelihood of interest rate cuts by the Federal Reserve.

Among the S&P's major sectors, technology .SPLRCT led the pack, rising 1.32%, led by gains from chipmakers including Nvidia, which rose 2.49% ahead of its quarterly earnings report.

Investors are looking at Nvidia's earnings to see whether the artificial intelligence leader will maintain its rapid growth and advantage over rivals.

Several brokerages increased their targets for Nvidia, and Micron Technology (MU.O) shares rose 2.96% after Morgan Stanley upgraded its rating to "equal weight" from "underweight." The PHLX Semiconductor Index (.SOX) rose 2.15%.

Stephen Massocca, a senior vice president at San Francisco-based Wedbush Securities, said: "If Nvidia's results exceed expectations, it could cause a bit of a stir. However, given the high cost, significant growth is unlikely."

"A Fed rate cut could spark a rally, but current data doesn't yet support that scenario."

The Dow Jones Industrial Average (.DJI) fell 196.82 points, or 0.49%, to 39,806.77. While the S&P 500 Index (.SPX) rose 4.86 points, or 0.09%, to 5,308.13, and the Nasdaq Composite Index (.IXIC) rose 108.91 points, or 0.65%. , closing at 16,794.87.

The Dow's decline came as JPMorgan (JPM.N) shares fell 4.5% after CEO Jamie Dimon expressed "cautious pessimism" and noted that the company has no plans to buy back shares at current prices.

A strong earnings season and signs of slowing inflation have reignited expectations that the Federal Reserve will cut interest rates this year, pushing major indexes to record levels. Let's remember that last week the Dow Jones index (.DJI) exceeded 40,000 points for the first time.

Fed officials' comments on Monday had little impact on interest rate forecasts, despite their insistence that inflation pressures were easing and emphasizing the importance of a cautious approach.

The minutes of the Federal Reserve's latest monetary policy meeting are scheduled to be released on Wednesday. Markets estimate the chance of a rate cut of at least 25 basis points at the September meeting at 63.3%.

The latest stock market rally has raised concerns about lofty stock valuations, with the S&P 500 trading at a P/E ratio of 20.8, well above its historical average of 15.9, according to LSEG.

Deutsche Bank raised its end-2024 forecast for the S&P 500 to 5,500 from a previous 5,100, the highest expected level among leading brokerages. In turn, Morgan Stanley predicts that the index will reach 5,400 points by June 2025.

Shares of the Norwegian cruise line (NCLH.N) rose 7.56% after the company raised its full-year profit forecast. On the New York Stock Exchange, advancing stocks outnumbered declining ones by a ratio of 1.14 to 1. At the same time, on the Nasdaq, declining stocks outnumbered advancing ones by a ratio of 1.01 to 1.

The S&P 500 has recorded 58 new highs and four new lows over the past 52 weeks, while the Nasdaq has posted 222 new highs and 101 new lows. Trading volume on US exchanges reached 12.31 billion shares, exceeding the last 20 trading days' average of 11.82 billion.

Asian markets were lower and the dollar held steady on Tuesday ahead of the release of minutes from the Federal Reserve's latest meeting, which could provide clues about the timing and extent of a potential interest rate cut this year.

Gold prices retreated from Monday's record high and oil prices fell on concerns that U.S. interest rates could remain high for a long time due to the Federal Reserve's cautious approach to the recent decline in inflation.

Cryptocurrencies including ether and bitcoin hit new six-week highs amid speculation the US Securities and Exchange Commission (SEC) could approve a spot exchange-traded fund (ETF) for ether.

MSCI's index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.9% after the Hang Seng retreated 1.9% from its multi-month high hit on Monday.

Japan's Nikkei (.N225), which tracks technology stocks, subsequently edged 0.1% lower after rising to record highs overnight.

Nasdaq futures fell 0.06%, while S&P 500 futures remained steady after rising 0.1% the previous day.

"Market sentiment continues to remain relatively stable with low implied volatility, supported by confidence in the possibility of US interest rate cuts this year," Kyle Rodda, senior markets analyst at Capital.com, said in an analysis.

In addition, record price levels for metals such as gold and copper "act as indicators of a pick-up in economic activity around the world, which in turn could act as a headwind for inflation," Rodda added.

Gold fell 0.3% to around $2,417 an ounce, after first rising to $2,450 overnight.

The dollar held its ground against major currencies, with the dollar index remaining at 104.62, recovering from a five-week low of 104.07 recorded on Thursday.

The 10-year U.S. Treasury yield was little changed at 4.4433% after rising 1.7 basis points on Monday.

Brent crude fell 0.7% to $83.17 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 0.7% to $79.22 a barrel.

At the same time, after the announcement that the Securities and Exchange Commission (SEC) unexpectedly required exchanges wishing to trade Ethereum ETFs to update their regulatory documents, traders were actively purchasing cryptocurrencies. The development raised expectations that approval for trading could come as soon as this week, sending the market to new highs.

Bitcoin hit $71,957 while Ethereum rose to $3,720.80, both setting highs not seen since April 9.

"Expectations regarding the approval of the Ethereum ETF have significantly impacted market activity, adding to the already growing bullish trend in the cryptocurrency space. The move gained further momentum after lower-than-expected US CPI data was released last week," said IG analyst Tony Sycamore.

Sycamore predicts that Bitcoin could soon again reach its all-time high of $73,803.25 and possibly even surpass the $80,000 mark.

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Technical Analysis of Intraday Price Movement of AUD/JPY Cross Currency Pairs, Wednesday May 22, 2024.

On the 4 hour chart, Silver commodity asset is appear, although the price is moving above WMA 20 which indicates that there are still a lot of buyers of this commodity asset. But if we pay attention, the level of 32,444 failed to be broken a few times which shows that in the near future Silver has the potential to corrected downwards where level 31,033 has the potential to be tests. If it managed to break, then Silver willgo to level 30,320 as the main target and if the momentum and volatility are supportive then level 29,615 will be the next target, but if on its way to these target levels it suddenly strengthens again and breaks above level 32,444 then all the weakening correction scenarios that have been described will become invalid and cancel itself.

(Disclaimer)

To be noted: the title seems not match with the content of the article, I only follow the source text.
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Ups and downs: market reaction to the Fed and Nvidia's success

American stock markets fell on Wednesday, caused by investors' reaction to the published minutes of the latest Federal Reserve meeting. At the same time, Nvidia shares rose sharply, rising 6% in after-hours trading after announcing earnings that beat analysts' expectations.

The announcement also boosted share prices of other companies in the chip manufacturing sector. Investors' attention has been focused on Nvidia's (NVDA.O) ability to meet strong first-quarter guidance and the potential to sustain growth in artificial intelligence stocks.

Nvidia shares, which ended the trading day lower, are up about 90% this year, following an impressive 240% gain in 2023.

"The market is looking for confirmation from Nvidia that they are able to maintain leadership despite their current successes... and what will happen to their strategic vision in the future and how they justify current estimates of their value," commented Megan Horneman, chief investment officer at Verdance Capital Advisors in Hunt Valley, Maryland.

"The most important thing is company valuations. Regardless of how the market reacts to the news, we must look closely at the financial statements and valuations offered for these companies' shares to understand how overvalued they may be," she added.

The Dow Jones Industrial Average .DJI lost 201.95 points, or 0.51%, to close at 39,671.04. The S&P 500 Index (.SPX) was down 14.40 points, or 0.27%, at 5,307.01. And the Nasdaq Composite Index .IXIC fell 31.08 points, or 0.18%, to finish the day at 16,801.54.

Stocks fluctuated throughout most of the trading session, but lost ground after the release of Federal Reserve meeting minutes revealed that central bankers still expect inflation to slow but admit it will be a long process, prompting disappointment due to latest inflation data.

The Fed's meeting, held from April 30 to May 1, followed a quarter of stable inflation but came ahead of later data indicating a potential easing in price pressures.

Stocks hit record highs this month, thanks in part to optimism in artificial intelligence, a strong earnings season and renewed expectations of a Fed rate cut this year.

Analysts expect the S&P 500 to remain near current levels of around 5,302 by year's end, but caution that significant gains in the index could lead to a correction in the coming months.

According to CME's FedWatch Tool, the likelihood of the Fed cutting rates by 25 basis points by the September meeting is estimated by markets at 59%, down from the previous level of 65.7%.

Shares of Analog Devices (ADI.O) rose 10.86% after announcing it expected third-quarter revenue to beat estimates.

The energy sector (.SPNY) was the worst performer, down 1.83%, as oil prices continued to decline for a third straight session.

Retail chain Target (TGT.N) shares fell 8.03% as its quarterly earnings and guidance for the current quarter fell below expectations.

While TJ Maxx parent TJX Companies (TJX.N) shares rose 3.5% on improved full-year profit forecasts.

Decliners outnumbered advancers by a 2.75-to-1 ratio on the New York Stock Exchange and 1.5-to-1 on the Nasdaq.

Mixed quarterly results from Target (TGT.N) and TJX (TJX.N) sparked discussions about the stability of US consumer activity.

Nvidia's upcoming quarterly report presents a new test for the US stock rally, which is heavily dependent on the outlook for artificial intelligence technology.

Investor sentiment has strengthened, according to Bassuk: "The market as a whole, the semiconductor sector and especially Nvidia, may have grown too fast and too much. We believe there is excessive hype around Nvidia and investors should approach their stock purchases with greater caution."

Statistics showed that the volume of real estate sales in the United States was below experts' expectations. At the same time, unexpectedly high core inflation figures in the UK have led investors to abandon bets on a possible interest rate cut by the Bank of England next month.

British Prime Minister Rishi Sunak announced elections on July 4. His Conservative Party is expected to concede to the Labor Party.

"Sunak is probably counting on a surprise effect... but this is unlikely to have much impact on markets," said Jane Foley, head of currency strategy at Rabobank in London. "It doesn't change the fact that Labor is 20 points ahead in the polls."

European shares retreated on reports of high inflation in the UK and news that China could impose tariffs on imported cars.

The pan-European STOXX 600 Index (.STOXX) was down 0.34% and the MSCI Global Share Index (.MIWD00000PUS) was down 0.39%.

Emerging market shares rose 0.12%. MSCI's broad index of Asia-Pacific shares outside Japan .MIAPJ0000PUS ended the session 0.31% higher, while Japan's Nikkei .N225 fell 0.85%.

The 10-year US Treasury yield rose from session lows following the release of Fed minutes.

At the last meeting, the 10-year Treasury note fell 4/32 in price, yielding 4.4276%, up from 4.414% at the end of the previous day.

The price of the 30-year US Treasury note rose to 4.5443% after rising 5/32 from 4.554% recorded Tuesday evening.

The US dollar strengthened against major world currencies. The dollar index (.DXY) rose 0.26%, while the euro weakened 0.29% to $1.0823.

The Japanese yen lost 0.39% to trade at 156.78 per dollar. The British pound was up 0.05% on the day, trading at $1.2713.

Oil prices extended their decline for a third straight day amid concerns that the US Federal Reserve's tight monetary policy could dampen demand.

The price of US WTI crude oil fell by 1.39%, reaching $77.57 per barrel, while Brent crude oil traded at $81.90 per barrel, down 1.18% from the previous value.

Gold prices also fell, moving away from recent record highs. The spot gold price fell 1.8% to $2,379.22 an ounce.
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The yen may have already executed a long-term reversal. Overview of USD/JPY

Business activity in Japan is growing at its fastest pace in almost a year, indicating that economic growth may recover in the second quarter after a decline in the first three months of the year. However, inflationary pressure continues to ease, raising doubts about the Bank of Japan's ability to continue raising rates without plunging the economy back into deflation.

The Jibun Bank Japan flash composite PMI index rose to 52.4 in May, marking the fastest growth in activity since August 2023.

At the same time, the general recovery is accompanied by rates of input cost and output price inflation both easing in May. According to S&P Global, this preludes "softer inflationary pressures across official gauges." Just an hour after the report was released, the BOJ announced that purchases of Japanese government bonds will remain unchanged in upcoming operations, refraining from making a further reduction. Earlier this month, markets had expected the BOJ to both raise rates and reduce bond purchases, so this news represents a small change in previous forecasts, thereby increasing bearish pressure on the yen.

The nationwide Consumer Price Index for April was set to be published on Thursday night, and core inflation was expected to slow from 2.6% to 2.2%. If the data's results are close to forecasts, the USD/JPY pair may rise, as this will reduce the likelihood of a BOJ rate hike amid easing inflation.

The net short JPY position has decreased to -10.5 billion, marking the third consecutive week of decline. Regardless, speculative positioning remains firmly bearish, and it is still too early to count on a long-term reversal. The price is below the long-term average and is heading downwards.

The likelihood that USD/JPY formed a long-term high of 160.20 on April 29 is increasing. The pair stopped rising due to a powerful currency intervention by the BOJ (reportedly involving $60 billion). However, over the past three weeks, the yield on 10-year Japanese bonds has closely approached 1%, reflecting the market's reassessment of its prospects on the future interest rate.

We expect the pair to reverse before it approaches 160, so the most reasonable strategy at this stage is to sell on rallies in anticipation of a long-term reversal. The nearest target is 153.40/60, with a local low at 151.78. Consolidation below this level will reinforce the bearish sentiment.

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In the thick of things: inflation in the West and financial news from the East

Experts are looking forward to the release of the US personal consumption price (PCE) index this Friday, which is a key indicator for the Federal Reserve System (Fed).

The data is expected to provide insight into future interest rate movements for the remainder of the year. Markets have already adjusted to the possibility of a rate hike, based on recently released Fed meeting minutes and muted comments from officials expressing doubts about a sustained decline in inflation.

Earlier this month, separate reports showed moderate growth in consumer prices, which was below expectations. This has raised hopes of a possible rate cut this year after months of higher inflation.

Minutes of the Fed's latest meetings confirmed that regulators expect price pressures to ease, although they cautioned that it will be necessary to wait several months before they can be sure that the 2% inflation target has been achieved before undertaking new economic initiatives.

This week, market participants will expect a series of speeches from a number of key figures from the Federal Reserve, including Michelle Bowman, Loretta Mester from the Cleveland Fed, Lisa Cook, John Williams from the New York Fed and Raphael Bostic from the Atlanta Fed. These events will provide investors with additional guidance regarding the current economic climate.

Also included in the economic agenda are updated estimates of first-quarter U.S. economic growth due Thursday, as well as the Federal Reserve's Beige Book report scheduled for Wednesday. These data will provide additional information about the state of the economy, which could influence future monetary policy decisions.

At the upcoming June meeting, the European Central Bank (ECB) is likely to take steps to cut interest rates from the current record level of 4%. However, the pace of further rate cuts remains an open question, especially in the context of upcoming eurozone inflation data on Friday, which could indicate continued price pressures.

Eurozone inflation is expected to rise to 2.5% per annum in May from 2.4% in April, while core inflation will remain at 2.7%. This should not prevent the ECB from cutting rates in June, although some officials have spoken out against further easing of monetary policy.

Next week will also see the release of important economic data for the eurozone, including the Ifo business climate index in Germany on Monday and the ECB's survey of inflation expectations on Tuesday.

Market attention is focused on the upcoming inflation data in Tokyo, which will be published this Friday. Analysts and investors are analyzing this data in an attempt to predict possible changes in the Bank of Japan's monetary policy, especially in the context of the expected next interest rate hike.

This publication will take place two weeks before the Bank of Japan meeting, at which, as experts suggest, a second rate hike may occur after a significant decision in March. The country is under growing pressure on the central bank to raise rates as the yen continues to weaken, raising the cost of imported goods and weighing on consumer demand.

Also this Friday, the Japanese Ministry of Finance will present data on the latest interventions in the foreign exchange market and changes in the bond purchase schedule of the Bank of Japan. Investors will be closely watching for a possible reduction in purchases by the central bank.

Early in the week on Monday, China will release industrial profit data for the past year, allowing analysts and investors to assess whether April's performance recovered from a big drop in March. The drop weighed on the country's economic growth in the first quarter, which slowed to 4.3%.

The official PMIs for the manufacturing and non-manufacturing sectors will be released on Friday. Economists forecast that the manufacturing PMI should exceed the threshold of 50 for the third time in a row in May, indicating growth in the sector.

Beijing has set an ambitious target for economic growth of around 5% this year, but many experts say that target is difficult to achieve. Continued difficulties in the real estate sector and weak consumer demand continue to be major headwinds for the world's second-largest economy.

Oil prices rose 1% on Friday, but ended the week in the red on expectations that strong economic growth in the US could keep interest rates high for an extended period, which in turn would weigh on fuel demand.

Brent prices fell 2.1% during the week, marking the largest number of consecutive declines since early January. The US WTI fell 2.8% for the week.

High interest rates lead to rising borrowing costs, which could limit economic activity and reduce demand for oil. However, overall oil demand remains high, according to Morgan Stanley analysts.

They estimate that global consumption of liquid petroleum products will increase by about 1.5 million barrels per day this year.

Weak demand for gasoline in the United States is compensated by an increase in global demand, especially noticeable at the beginning of the year, experts emphasize.

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Nasdaq hits 17,000 milestone as market swings continue

On Tuesday, the Nasdaq hit 17,000 for the first time on strong gains in Nvidia shares, while the S&P 500 ended slightly higher and the Dow Jones Industrial Average fell as Treasury yields rose.

Shares of Nvidia (NVDA.O) rose 7%, also lifting shares of other chip makers as traders returned to the market after a long weekend. The semiconductor index (.SOX) recorded an increase of 1.9%.

The S&P 500's technology (.SPLRCT) sector posted the best gains, while healthcare (.SPXHC) and industrials (.SPLRCI) posted the biggest declines.

The current situation in the stock market was exacerbated by rising US Treasury yields, which reached a multi-week high after the results of auctions for the sale of government debt were unsatisfactory.

"We experienced two unsuccessful auctions, which led to higher bond yields and a negative reaction in the stock market," said Quincy Crosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

He also added: "The market is discouraged from rising bond yields to levels that could threaten economic stability and consumer demand, and disrupt the Federal Reserve's policy easing plans."

This week, investors are eagerly awaiting new data on inflation in the United States, which could significantly affect the forecasts for changes in the Federal Reserve's key rate.

The main report on the core US personal consumption price index for April is due out this week. This key inflation indicator, which the Federal Reserve uses to make decisions, is expected to show stability on a monthly basis.

The Dow Jones Industrial Average (.DJI) suffered losses, falling 216.73 points, or 0.55%, to 38,852.86. Meanwhile, the S&P 500 (.SPX) rose slightly 1.32 points, or 0.02%, to 5,306.04, and the Nasdaq Composite (.IXIC) rose 99.09 points, or 0.59 %, closing at 17,019.88.

Wall Street continues to set records as investors look to the Federal Reserve to cut interest rates later this year.

Fluctuations remain in expectations about the timing of rate cuts, with policymakers remaining cautious as economic data continues to show significant inflation.

According to the CME FedWatch tool, the likelihood of an interest rate cut of at least 25 basis points is greater than 50% only in November and December of this year. In September, the figure dropped to about 46% from more than 50% the week before.

Market attention is also focused on retail, especially with upcoming reports from major retailers including Dollar General (DG.N), Advance Auto Parts (AAP.N) and Best Buy (BBY.N).

On Tuesday, US stock markets will begin the transition to a shorter settlement cycle. Regulators expect this to reduce risks and improve operational efficiency, although it is expected that the transition may initially increase the number of failed deals among investors.

Apple's (AAPL.O) share price rose after iPhone sales in China rose 52% in April from a year earlier, according to Reuters calculations based on industry data. However, by the close of trading, the stock's gains had slowed and it ended only slightly higher than its previous level, at $189.99.

GameStop (GME.N) shares jumped 25.2% to finish the day at $23.78 after the company announced Friday evening that it had raised $933 million by selling 45 million shares in what it called a "market" offering.

Shareholders of Hess (HES.N) approved its merger with Chevron (CVX.N), valued at $53 billion. Hess shares ended up 0.4%, Chevron shares were up 0.8% and Exxon Mobil (XOM.N) shares were up 1.3%.

On the Nasdaq, decliners outnumbered advancers by a ratio of 1.34 to 1. On the NYSE, the ratio was 1.75 to 1.

The S&P 500 posted 24 new highs and 11 new lows for the year, while the Nasdaq Composite posted 93 new highs and 107 new lows.

Trading volume on US exchanges reached 11.91 billion shares, slightly below the average level of 12.32 billion recorded over the past 20 trading days.

US Treasury yields rose after a failed debt auction. It also rose earlier when data showed an unexpected improvement in US consumer confidence in May, boosted by optimism about the labor market, which had seen contraction for the previous three months.

Meanwhile, March saw a sharp slowdown in US home price growth, likely as rising mortgage rates put pressure on demand.

"The market is nervously awaiting confirmation of a slowdown in inflation towards the Fed target," an analyst from Goldman comments on the situation.

The MSCI Global Share Index .MIWD00000PUS lost 1.28 points, or 0.16%, to 792.07.

Europe's STOXX 600 index (.STOXX) ended the session down 0.6%. Treasury yields rose after two failed government debt auctions raised doubts about demand for U.S. government debt, while investors also weighed economic indicators that raised uncertainty about the Federal Reserve's future monetary policy.

"Given Tuesday's volume of supply, which included $297 billion in coupons and notes, some discomfort is to be expected," said Tom Simons, an economist at Jefferies in New York.

The yield on the 10-year US benchmark note rose 6.7 basis points to 4.54%, up from 4.473% reported late Friday. Also, the 30-year yield rose 7.9 basis points to 4.656%.

The 2-year yield, which traditionally responds to changes in interest rate expectations, rose 2.1 basis points to 4.9742%.

As for the foreign exchange market, the dollar index recovered its position after the rise in Treasury yields and showed a slight increase.

"The bond market took a sharp turn on Tuesday and the dollar followed suit," said Adam Button, chief currency analyst at ForexLive in Toronto, citing weak auction results and noting that an improvement in the consumer confidence report suggested stronger economic growth.

The index measuring the dollar against a basket of foreign currencies, including the yen and the euro, rose 0.04% to 104.60, while the euro remained unchanged at $1.0858.

Against the Japanese yen, the value of the dollar increased by 0.18%, reaching 157.14.

Oil prices rose more than a dollar a barrel in anticipation that OPEC+ will continue to curb crude supplies at its upcoming meeting on June 2. Additional growth in commodity prices was triggered by the start of the summer road travel season in the United States and the weakening of the dollar.

US crude futures rose 2.71% to $79.83 per barrel, while Brent crude rose 1.35% to settle at $84.22 per barrel.

There was also an increase in gold prices: the spot price of gold rose by 0.33%, reaching $2,358.58 per ounce. US gold futures rose 1.17% and now cost $2,359.70 an ounce.
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The main events by the morning: May 30

Russia and China can withdraw their financial operations from the influence of the West. The countries are able to develop independent transaction mechanisms among themselves. For example, through regional banks, sanctions against which do not interfere with their work. Moreover, American bankers are afraid of the isolation of the Russian economy, which could push other countries to accelerate the abandonment of the dollar.

The United States plans to increase sanctions pressure on Russia. America seeks to limit Russia's access to foreign components for the military-industrial complex, said Deputy Head of the US Treasury Department Adeyemo. However, according to him, in order to achieve this goal, the United States will need the support of its allies.

Russian diamonds have found new markets. In January-April, Hong Kong increased purchases of Russian diamonds by more than 15 times, to $527 million. Thanks to this, Hong Kong's total imports from Russia reached $1.1 billion, which is the highest since 2011.

The world's central banks continue to buy gold, but prefer not to store it in the United States. The economies of Africa and the Middle East are actively exporting their gold from American vaults. According to Roscongress, 68% of countries already store their gold reserves on their territory, whereas in 2020 this figure was 50%. The trend for the sale of US Treasury bonds is also increasing.

In Thailand, payment with «Mir» cards can be launched, but this may not happen soon. The Russian embassy in the country stated that negotiations on this issue are already underway. However, due to the sanctions pressure on Thailand from the West, the parties are not yet ready to give clear deadlines.
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Nasdaq red flags: Salesforce drops index 1%

U.S. stock indexes ended lower on Thursday, with the Nasdaq losing more than 1% and tech stocks leading the decline after a disappointing outlook from Salesforce.

Investors also weighed data showing the U.S. economy grew more slowly than expected in the first quarter. A separate report showed weekly jobless claims rose more than expected. Salesforce (CRM.N) shares fell 19.7% a day after the company forecast second-quarter profit and revenue below market expectations, citing weak customer spending on its cloud and enterprise products.

The S&P 500's technology sector (.SPLRCT) fell 2.5%, leading the decline in the benchmark index. The communications services sector (.SPLRCL) fell 1.1%, while other S&P 500 sectors ended the day higher.

The Commerce Department's report showed that first-quarter economic growth was revised down as consumer spending and equipment investment slowed, as well as a key inflation measure fell ahead of the April personal consumption expenditure report.

"Typically, a downward revision to GDP would be expected to lift the market, as it would signal that the economy is slowing and signal that the Fed has accomplished its mission, which could lead to rate cuts. "But today we're seeing a different reaction," said Mark Hackett, head of investment research at Nationwide. "I'm a little surprised, but not too surprised, given that after six weeks of rallying, the situation looks pretty healthy.

The expectation is that we'll see some consolidation or sideways movement in the market in the near term." The S&P 500 (.SPX) fell 31.47 points, or 0.60%, to end the session at 5,235.48. The Nasdaq Composite (.IXIC) lost 183.50 points, or 1.08%, to end at 16,737.08.

The Dow Jones Industrial Average (.DJI) fell 330.06 points, or 0.86%, to 38,111.48. U.S. Treasury yields fell after the data, while the chance of a rate cut of at least 25 basis points in September rose to 50.4% from 48.7%, according to CME's FedWatch tool. Bond yields hit multi-week highs earlier in the week.

In after-hours trading, Dell Technologies (DELL.N) shares fell more than 12% after the company reported its quarterly results. The stock ended the session down 5.2%.

HP (HPQ.N) shares rose 17% in the regular session after second-quarter revenue beat expectations. Tesla (TSLA.O) shares added 1.5% after it said it was preparing to register its self-driving software in China.

Best Buy (BBY.N) shares jumped 13.4% after the company beat quarterly profit estimates. Meanwhile, shares of department store chain Kohl's (KSS.N) fell 22.9% after cutting its full-year sales and profit forecasts.

Advancing stocks outnumbered decliners 2.57-to-1 on the NYSE and 1.41-to-1 on the Nasdaq. The S&P 500 posted 14 new 52-week highs and 10 new lows, while the Nasdaq Composite posted 51 new highs and 95 new lows.

U.S. exchanges reported trading volume of 12.10 billion shares, slightly below the 20-day average of 12.39 billion shares.

The U.S. economy grew more slowly than expected in the first quarter, according to a Commerce Department report that showed consumer spending weakened. Gross domestic product increased 1.3% year-over-year, compared with initial estimates of 1.6%.

The U.S. dollar index weakened after hitting a two-week high the day before. U.S. Treasury yields also fell Thursday after two days of gains on weak debt auction results.

"The initial reaction to the data was that the likelihood of a Fed rate cut has increased as the slowdown in the economy and consumption could help ease inflation," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. However, he views rates as one of many factors weighing on the market.

The MSCI World Equity Index (.MIWD00000PUS) was down 3.22 points, or 0.41%, at 780.94.

While investors digested the GDP data, they were eagerly awaiting Friday's April report on the core U.S. personal consumption expenditures (PCE) price index, a key inflation gauge for the Fed.

Earlier in Europe, the STOXX 600 (.STOXX) rose 0.6% after a big drop on Wednesday, driven by data showing German inflation rose more than expected in May. Investors were eyeing key euro zone inflation data due on Friday.

The yield on 10-year U.S. Treasury notes fell 7.6 basis points to 4.548%, from 4.624% late Wednesday. The yield on 30-year notes fell 6.3 basis points to 4.6814% from 4.744%, and the yield on 2-year notes, which typically reflects interest rate expectations, fell 5.6 basis points to 4.929% from 4.985%. In the foreign exchange market, the dollar index, which measures the dollar against a basket of currencies including the yen and the euro, fell 0.34% to 104.77.

The euro gained 0.26% to $1.0828, while the dollar weakened 0.47% against the Japanese yen to 156.86 yen.

In energy, oil prices fell for a second day after the U.S. government reported weak fuel demand and an unexpected increase in gasoline and distillate inventories.

U.S. crude fell 1.67% to $77.91 a barrel, while Brent crude futures fell 2.08% to $81.86 a barrel. Spot gold prices rose 0.13% to $2,341.94 an ounce, led by lower dollar and Treasury yields.
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