Even though we are coming towards the end of the month, news releases and volatility are not likely to decline. Investors are readying for a busy week, specifically in US, UK and European equities. As earnings season enters its third week, investors focus on the NASDAQ and the technology sector. Investors on Friday were quick to buy the NASDAQ to take advantage of the lower price and position themselves in the market ahead of this week’s big earning reports.
On Friday, the NASDAQ increased by 2.44% and was the best-performing index, which the market has not experienced for a while. The NASDAQ increased 0.77% more than the SNP500 and 1.51% more than the Dow Jones. The Dow Jones continues to struggle after the poor earnings released within the banking sector. The market’s investment decisions currently favor positive reports coming from the technology sector. Microsoft, Tesla and AT&T will release their earnings over the next 3 days.
US Dollar again Dips as Stocks Rebound
The US Dollar Index continues to decline for two main reasons. The market continues to bet against the Federal Reserve and price in a weaker monetary policy. The Federal Open Market Committee is expected to increase rates by 0.25% in February. The European Central Bank is expected to increase its main refinancing rate by 0.75% and 1.00% over the next two months.
In addition to this, economists continue to advise the chances of a recession is fading, the latest to take this opinion is JP Morgan. This can create a higher risk appetite known to pressure the Dollar. However, this has not yet been experienced with other safe-haven assets such as Gold. Therefore the main reasoning behind the movement is mainly related to monetary policy.
Bitcoin Climbs to a 22-Week High
As the market’s risk appetite increases across the board, investors also turn their attention to Bitcoin, which has climbed to a 22-week high. Bitcoin's price has increased by 34% over the past 2-weeks and the overall market capitalization has also increased above $1-Trillion. Additionally, Bitcoin has also experienced its sector share increase to almost 42%. This is significantly higher than the 38% we experienced towards the end of 2022.
However, investors should be cautious that the price has increased consecutively for 2 weeks without any major retracement. In addition, the price is very close to the overbought zone on the Relative Strength Index.
Gold Dips but Long Positions Increase
The price of Gold is declining this morning during the Asian Trading Session. Gold’s price this morning has declined by 0.22% and is attempting to decline below the previous low formed on Friday. Even with the slight decline, the price is not receiving any major signals of a longer-term downward trend.
However, the price has formed a strong resistance level at $1,935, which has caused the price to decline on 4 occasions on Thursday and Friday. The price of the RSI is at 52.05, which does not indicate a specific direction and, therefore, can swing in either direction. Consequently, the price action analysis will be vital for technical analysis. For example, breakouts, support levels, resistance levels, and impulse waves.
As the instrument targets the $2,000 price level the instrument is gaining more popularity. The US Commodity Futures Trading Commission (CFTC) has confirmed in their latest report that the number of positions in Gold increased from 150.5 thousand to over 153.2 thousand contracts. Overall the market still is in favor of the price declining in the longer term, possibly some investors believe the instrument may become overbought above $2,000.
However, investors should note that even though bear contracts hold the lead, long positions are increasing drastically. Therefore investors will continue to monitor in case the scenario changes.
This week the asset will be influenced by the global Purchasing Manager Reports scheduled for tomorrow, the US GDP figure and the earning reports of major global companies. A better economic outlook can strain Gold’s upward trend, whereas a higher risk of recession increases demand for Gold. Lastly, the price movement of the Dollar will also be a significant factor.
Summary:
- The US Dollar Continues to decline due to the Fed’s Monetary Policy Change.
- As earnings season enters its third week, investors focus on the NASDAQ and the technology sector.
- Gold prices slightly decline but avoid bearish signals from technical analysis. The CFTC confirms bullish contracts have increased.
- This week investors turn their attention to the global Purchasing Manager Reports scheduled for tomorrow, the US GDP figure and the earning reports of major global companies.
