The European Central Bank held its policy meeting, Alphabet and Tesla have kicked off the big tech earnings season, and crude oil is back in the 90s. There’s plenty to cover, so follow us as we bring you up to speed on what happened in financial markets this week.
Global Macro
This week, the ECB had its 6-weekly monetary policy meeting, as the board elected to keep interest rates stable. However, this move was largely priced in, as the ECB had already raised rates at its last meeting, with inflation only slightly above target.
The internal dialogue was a surprise, however, as several governors discussed hiking rates again, to combat the expected increases in inflation. This indicates that a second rate hike this year (contrary to expectations at the start of the year) is a very real possibility.
Equities
Tesla and Alphabet kicked off the big Tech earnings season with some mixed results. On one hand, Tesla's earnings came short by 36% of the expected earnings, causing a 15% drop. On the other hand, however, Alphabet grew its operating income 30% YoY and significantly beat expected earnings.
Nasdaq on the Daily timeframe
However, despite those stellar returns, the stock dropped 7% as Alphabet announced it will be increasing its capex even further. Meanwhile, many investors are convinced that all of this spending is leading to marginal improvements in sales, arguing that AI is turning into a bubble.
That is partially what caused the Nasdaq to have a disappointing week, despite stellar earnings from one of the key heavyweights, with sellers now the most in control they have been since March of this year. An initial, although smaller support zone resides at $28,225, with a larger, stronger support zone sitting around $26,500. Pay attention to the fact that the latter level is both an area of old highs and old lows, while also being the range Volume Value Area High.
Forex
For those reading the market pulse consistently, you should already be familiar with the concept of a bearish engulfing candle and recognise how telling it can be.
EUR/USD on the Daily Timeframe
The low of the day before a bearish engulfing is the key level to watch; hold below it, and the 1.132 swing low becomes the logical next stop. Hold above, and 1.15 is the next area of interest.
Commodities
In recent editions, we’ve been talking about oil non-stop; however, as the asset with the cleanest read on the Middle East conflict, it’s necessary to keep watching it.
Oil on the Daily Timeframe
In previous editions, we drew the above price path, adjusting leg D upwards once it became clear the conflict had restarted. Price has followed this path beautifully, and we see no reason to adjust it currently either, as the fundamental situation has stayed consistent. Any further escalation might extend the amount of time it takes for leg E to complete, although the expectation is still a long-term recovery of oil prices to normal levels.
Conclusion
One-sentence summary of the week:
Stocks falter despite strong earnings; meanwhile, oil tests old resistance.