- The Federal Reserve Chairman advises journalists that interest rate cuts are not likely in March. However, bond yields continue to decline indicating institutions continue to believe cuts are impending.
- The USA100 declines by 2.5% over two consecutive days after earnings data was unable to support individual stocks.
- Futures market points lower in Europe and Asian stocks show no clear direction. Traders are considering if investors will take advantage of the lower price ahead of tonight’s vital earnings data.
- Stock traders turn their attention to earnings from Apple, Amazon and Meta. The three stocks make up almost 18% of the NASDAQ.
EURUSD – The US Dollar Rises Against All Currencies!
The EURUSD exchange saw one of the highest levels of volatility amongst the “major currency pair” category. The exchange rate saw two significant impulse waves which can be explained using fundamental factors. The first impulse wave was in favor of the Euro and was largely due to the German inflation data reading higher than expectations. The correction which followed in the US session was due to the Fed’s comments on future interest rates.
This morning the exchange rate trades 0.30% lower and continues to obtain sell signals against the Dollar. The US Dollar Index is trading at its highest level since early December 2023. The Euro on the other hand is not witnessing any significant price movements against other major competitors. The Euro upward price movement was generally weak against the Dollar as German inflation still fell despite the smaller decline and also French inflation fell by a considerable -0.2%.
The US Dollar saw some negative economic data for the first time in over two weeks in yesterday’s session. The ADP Non-Farm Employment Change read 41,000 lower than expectations and the Employment Cost Index for the quarter fell to its lowest level since July 2021. Nonetheless, the Federal Reserve confirmed in their press conference that a rate cut in March is not likely. According to analysts, the Fed will not likely cut at the March meeting unless employment data takes a serious hit. According to the CM Exchange, there is a 92% chance of a rate cut in May and a certain cut by June at the latest. The Fed did not give any indications that this is not possible and is being backed this morning by declining yields. The question is who will opt for larger and more frequent cuts, the Fed, the ECB or the Bank of England.
USA100 – Will Investors Continue Profit Taking?
The USA100 saw a considerable downward price movement on Wednesday and order flow analysis indicates seller overpowering buy orders. In addition to this, the assets traded below the volume weighted average price throughout the whole day. Technical analysis and order flow indicate a decline in the asset; however, traders also need to consider if investors will look to re-enter at a lower price.
This will largely depend on tonight’s earnings data. Analysts expect Apple, Amazon, and Meta to witness significantly higher earnings as well as revenue. However, the question is whether the companies will beat expectations. Investors will also be closely monitoring reviews on the new Apple headset. These reviews and future sales figures can significantly affect Apple stocks which hold 8.78% of the NASDAQ. So far, reviews are positive in terms of the technology and experience, but negative in terms of the price and demand due to the high cost.
GBPJPY – Investors Turn Their Attention to Bank of England Votes
The GBPJPY is decreasing in value for its fourth consecutive day and is trading at its lowest level since January 16th. Throughout the year the Japanese Yen is expected to perform well due to being the only Central Bank which will not be cutting interest rates. However, in the short-term, the price action will depend on this afternoon’s Bank of England Press conference and “Committee Votes”.
The rate decision is without a doubt not going to change this month, however, the change in votes can create volatility. Analysts expect 2 members of the committee to vote for another interest rate increase, which is lower than last month’s 3 votes. If the votes are more hawkish than expectations, the Pound can rise. Whereas less votes for rate increases or a vote for a decrease would significantly pressure the Pound.
Technical analysis signals a downward trend when evaluating momentum and trend-based indications. However, the price has fallen to the previous resistance level which can be flipped to a support.
Michalis Efthymiou
Market Analyst
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