- The Dow Jones rose 1.00% during Monday’s US trading session with only 16% of stocks declining. The Dow Jones’ best performing stock was Apple (+1.97%).
- European indices again open on a bullish price gap for a second consecutive day. Higher risk appetite supports global stocks.
- The Reserve Bank of Australia keeps interest rates unchanged and continues to warn about inflation risks.
- The US Dollar corrects upward during this morning’s Asian session after yesterday’s sharp decline.
USA30 – The Dow Jones Rebounds As Investors Take Advantage of The Lower Price!
The Dow Jones forms its first bullish daily candlestick after 4 days of consecutive declines. The price now trades above the 75-bar EMA and above the 100-bar SMA. The moving averages indicate the price is primarily being controlled by buyers. In addition to this, the price also trades above the Volume-Weighted Average Price which indicates bullish momentum but a higher price than previous buyers.
The price had formed a triple top at $38,923.36 which is a concern for investors as it is also a level where buyers failed to hold momentum within the month. If the price breaks above this level investors should be cautious about potential retracements or corrections. However, above this level buy signals are also likely to strengthen.
To further assist in determining the direction investors will focus on the retail sales, bond yields and the VIX. Investors will ideally like the Retail Sales data to come in as per expectations. This approach will show an improvement over the previous month without suggesting a significant increase in consumer demand. Unusually high consumer demand could lead to a more aggressive stance from the FOMC. In addition to this, the VIX, which is known as an indication of sentiment, is currently trading 0.56% higher. Buyers would like to see the index gain no further.
The strong performance of the global stock market also supports the index. European, UK and most Asian indices are trading higher. Short-term targets can be seen at $39,067.87 which is slightly below the previous resistance level.
AUDUSD – RBA Advises Caution Over Inflation!
The Australian Dollar gains after the Reserve Bank of Australian decision to keep interest rates unchanged and continued warning against the risk of inflation. The interest rate decision was in line with expectations, but analysts were expecting a slightly less stubborn stance on inflation. Since its peak in 2022, inflation has significantly fallen, due to higher interest rates. However, the most recent data shows that the rate of decline is slower.
The bank was clear that the rate is too high and not close enough to their target of 2.5%. The RBA also indicated that the monetary policy cannot be adjusted unless inflation falls to 3.00%. As a result, the exchange rate trades 0.30% higher. However, technical analysts also point to a concern.
The Australian Dollar is the best performing currency of this morning’s Asian session. However, the currency is known to struggle in the later sessions. In addition to this, the US Dollar Index is also trading higher adding 0.06%. Trend traders may find ease trading the AUD against the Japanese Yen or New Zealand Dollar which are the day’s worst performing so far.
Lastly, another positive factor is the higher price of Gold. If Gold continues to rise, the price of the AUD may also rise due to its positive correlation. However, if the price declines throughout the day due to the rise in the Dollar, the AUD may come under pressure.
Michalis Efthymiou
Market Analyst
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