The Optimism on Stocks Didn’t Last Long
19 July 2022
Monday’s session was divided into two parts.
The first half was optimistic and allowed European indices to close on relatively high levels, a continuation of the mood from the end of last week. Out of all the major indices, the DAX looked the best, rising to its highest levels in two weeks. Part of that rise is gone now, but at least the price still stays above the mid-term down-trendline.
The second half, the American session, brought us a reversal, which was quite heavy on the Nasdaq and SP500. On the SP500 it was significant; the price bounced off the key down trendline, which only confirms the dominant bearish sentiment on the market. All of this doesn’t set a good mood for the start of Tuesday’s European session, which leads us to thinking that today’s session could end on the red side of the market.
On the currency market, the local star shines in Australia. The Reserve Bank of Australia released its meeting minutes and they were pretty hawkish. The board saw that the current rates are well below the neutral rate, which naturally opens a way to more rises in the future. That’s bullish information for the Australian Dollar and they used it wisely. The AUDUSD has already strengthened by almost 50 pips.
The EURUSD also climbed higher as buyers tried to drag the price from the 0.99 mark as far as possible. Now, we can already say that 1.0000 is definitely not only a psychological barrier but also a legitimate technical support, which will most probably be respected in the future.
Moving to commodities, we have a bullish oil and bearish gold, so pretty much a comeback to a scenario that we saw in May, where those two assets moved in the opposite direction, despite both of them being quoted in US dollars.
Brent Oil is aiming at the 108.5 USD/bbl and this can be a local target. Reaching it may stop the bounce for a while. On the other hand, gold is aiming at the 1675 USD/oz support, a crucial level from 2021, and chances that sellers will accomplish their mission is quite high. Reaching that support can deplete the bearish momentum and can be the start of a correction, just like what happened throughout 2021.
Today’s calendar is not really packed. We had meeting minutes from RBA, as mentioned before. Still to come, we have the final CPI print from the Eurozone and GDT Price Index – important for the New Zealand Dollar. Tuesday will end with speeches from two central bankers: BoE Governor Andrew Bailey and the FOMC Member Lael Brainard. They could, but don’t have to, increase the volatility and the momentum on the market.