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Market Wrap
The day turned out to be quite a risk-on sort of day with only the assets that are sensitive towards rising yields, inflation and tightening monetary policy finding it hard to get a bid. The commodity pairs all ended up doing well with the US dollar still green for the day.
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The economic calendar was devoid of anything Tier-1 related though we did get some business optimism and confidence data from either side of the Atlantic. US Small Business Optimism fell in July as the NFIB Small Business Optimism Index decreased 2.8 points to 99.7 in July down from an 8-month high of 102.5 in June. German ZEW Indicator of Economic Sentiment also declined by 22.9 points to 40.4 in August of 2021, coming in below analysts’ expectations and at its lowest level since November 2020.
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The DAX is following all other major Western indices higher, and I have put a measured move as a target for the price action as momentum is accelerating higher now. 16787 to 17000 seem to be a good place for bulls to reassess’ things. Even though the business sentiment is down, and the factory orders are down, the Europeans today did agree to put €30bln into the German economy to help with the floods that devastated large parts of the country. This stimulus along with the general move higher will feed into the equities.
The EURUSD weekly chart shows how weak the euro is becoming and now the weekly 200 ema is looking like the most logical target to the downside.
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The strong green back versus the yen is now gaining pace as the USDJPY goes higher to test the swing highs and possibly the range highs. The yen has been generally very weak with the odd day of bullishness only occurring when the markets are feeling very uncertain.
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The US equity markets generally opened higher today, as investors sensed the Senate were ready to pass the one trillion-dollar bipartisan infrastructure bill. The Dow Jones Industrial Average has broken out of the wedge pattern that it had carved over the previous 12 weeks. The Nasdaq bucked the trend and decided to test all the way down to 15,000 on the NQ futures. This has largely been down to the cycling out of the tech stocks into the infrastructure bill friendly stocks.
The final vote tally was 69 to 30 in favour of the infrastructure bill and now are voting on the budget bill. Nancy Pelosi has previously stated that she intends to wait for the second piece of infrastructure legislation, the $3.5 trillion deal to pass before putting either bill to the House of Representative, where it will be up to Speaker Pelosi to bring it to the floor.
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The EIA Short-Term Energy Outlook (STEO) left the 2021 oil demand unchanged at 5.33mln barrels per day. But they also cut their 2022 forecast by 100k bpd. Oil was at support and has since rebounded from the swing lows. The above-mentioned infrastructure bill will be good news for oil as the USA is the world’s biggest consumer of oil. The oil contract having fond support at previous market structure never got to test the daily 200 ema, so the next logical place to test are the 50 and 20 daily ema’s which are converging. $70 is likely to be resistance when prices test there, so if we can flush through that and clos above the ema’s more bullish speculators could step in to accelerate price back to the previous swing high.
