The USDIndex on Thursday (20/07) rose to a 1-week high of +0.56% and closed above the psychological threshold of $100.00. Signs of strengthening in the US labour market were seen as weekly initial jobless claims fell to a 2-month low.
US weekly initial jobless claims unexpectedly fell -9,000 to a 2-month low of 228,000, indicating a stronger than expected labour market rise to 240,000. The US July Philadelphia Fed business outlook survey rose +0.2 to -13.5, weaker than expectations of -10.0. June existing home sales fell -3.3% m/m to a 5-month low of 4.16 million, weaker than expectations of 4.20 million. Meanwhile, the June leading indicator fell -0.7% m/m, weaker than the expectation of -0.6% m/m.
The spike in bond yields and decline in stocks on Thursday contributed greatly to liquidity demand for the US Dollar. The 10-year yield rose to 3.85%, the unexpected drop in weekly jobless claims was a hawkish factor for Fed policy and weighed on bond prices. The USA500 index on Thursday closed down -0.63%, the USA30 closed up +0.49%, and the USA100 fell -2.1%.
Most stocks closed lower on Thursday, although the USA30 rose to a 15-month high. Plunging shares of Netflix and Tesla weighed on tech stocks and the broader market. Netflix fell more than -8% after projecting weaker-than-expected Q3 revenue, and Tesla fell more than -9% after reporting lower-than-expected Q3 gross margins. In contrast, better-than-expected quarterly earnings results from Johnson & Johnson and International Business Machines pushed the USA30 higher.
Technical Review
USA30, D1 continued its rally, owing to earnings support from the industrial sector. The USA30 registered a 15-month high of 35,398.0 on Thursday, 0.27% below the April 2022 high (35,494.0). This price level will be the nearest rally target if the index continues to move north. Above the April high, there was still the Feb’22 high of 35,870.2 before reaching the Jan’22 historic high of 36,953.0. Technical indicators still validate the bulls’ northward migration, but the RSI clearly sheds light on the ongoing overbought situation.
While correction to the downside will be hindered by 34,618.0 resistance which is now support, and further to 33,631.3 support. However, a bullish scenario would be preferred, as long as the price still moves above the 26-day EMA (blue-line).
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Ady Phangestu
Market Analyst – HF Educational Office – Indonesia
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