A Tale of Two Halves: Market Volatility and the Power of the USD
02 June 2023
Thursday in the financial world was a day of revelations. The stage was set with the release of Manufacturing PMIs from the globe's leading economies. The numbers, mostly falling below the magic 50 mark, hinted at a narrative of economic contraction. Meanwhile, the Eurozone, in a surprising twist, reported a significant drop in inflation, descending from a high of 7% to a more modest 6.1%. The ADP number from the US, however, decided to buck the trend and exceeded expectations significantly, reporting 27K against the anticipated 173K.
In the vibrant currency market, a series of events unfolded. The EURUSD, breaking free from the chains of a key mid-term downtrend, initiated a bullish correction. The USDCHF, on the other hand, slipped below the 0.9080 support, signaling traders to take a short position. The USDJPY, not wanting to be left out, is on its fifth consecutive bearish day, while the AUDUSD has risen like a phoenix above the 0.655 resistance, negating the previous bearish breakout. The USD, it seems, is the puppet master behind these shifts.
Over on the indices, buyers made a triumphant return. The SP500 and Nasdaq, like climbers nearing the summit, are flirting with long-term highs. The Dow Jones, bouncing back like a resilient boxer, has bounced off the lower line of the triangle, triggering a buy signal. The DAX, not to be outdone, continues its V-shaped reversal from the 15650 support.
Commodities, sensing the reversal of sentiment on the USD, are making the most of the situation. Silver, in its fourth consecutive bullish day, and Gold, currently drawing its sixth bullish candle in a row, are shining bright. Oil, after a significant drop earlier in the week, has also reversed its course.
Today, being the first Friday of the month, we await the traditional Non-Farm Payrolls from the US. This data, like a wildcard, could significantly alter the market landscape, as it has done countless times before. As of now, it appears that the V-shaped reversal seen on the charts will hold firm and should continue into the next week.