Over the past few months a strong inverse correlation has formed between the Dollar and US stock market. However, yesterday’s GDP reading triggered bullish movements in both the US Dollar, Crude Oil, and US Stocks. The US Dollar is trading at 0.40% against the Euro and 0.50% against the Japanese Yen. The latest price movement has mainly been influenced by the latest US economic data and earning reports.
EUR/USD - US GDP Surpasses Expectations
The price of the EUR/USD ended the day lower yesterday and is also declining this morning. Though, traders should note that the Euro is not giving up without a fight. A formal trend is known to form a lower swing low and a lower high. However, the price has formed a bearish Head and Shoulder pattern which is also a sign that the Euro may be losing momentum.
Investors will monitor if the price will break onto a higher swing at 1.08995 or a lower swing at 1.08494. Breakouts can provide indications of potential future price movement. Currently, technical analysis is indicating a small bullish retracement before declining further. This can be seen in the stochastic oscillator which has crossed downwards and the price is also trading below the Ichimoku range.
US investors were impressed by the first Gross Domestic Product reading. The Advance GDP was expected to show between 2.6-2.7%, but read 2.9%. The release shows that the economy is witnessing slower growth and a drop in consumer demand, but is also more resilient than previously expected. The US also released their Unemployment Claims and New Home Sales. Both announcements were better than expected.
The economic outlook for the European and US economies is similar when considering the latest economic data. Both economies have performed better than expected but risks still remain regarding a recession. According to European experts, the European economy is likely to experience a recession but will be shallower than previously thought. JP Morgan also added that the European economy is at a higher risk of a recession than the US.
It should be noted that even with the positive US data, experts still believe the Federal Reserve will lower their hikes to 25 basis points.
NASDAQ
The NASDAQ continues its bullish trend from last Friday. The NASDAQ has increased by over 6% and continues to outperform the SNP500 and Dow Jones. The price is now trading at its highest since December 13th and traders are considering whether the price will be able to push through the resistance level formed in December.
This week the price of the index has been supported by multiple factors. The main supporting factors remain the earnings reports released by Tesla, Netflix and Microsoft. Earning Reports throughout the week have outperformed expectations as has the US’s GDP. The higher GDP figure has supported investor confidence and has given hope that consumer demand may return to previous levels.
Crude Oil
The price of Crude Oil is witnessing a similar scenario to the NASDAQ with the price forming a bullish trend but reaching a significant resistance level. The Resistance originally formed at $82.50 in December and the instrument has also formed a triple top on the 4-hour chart. Both are indications that the price may be pressured over the next week.
However, the fundamental analysis continues to fuel a bullish trend of 12%. The US is the second largest consumer of Crude Oil and can have a significant influence over the price as does China. The latest GDP figures have indicated that the economy has grown faster than expected and also lowered the chance of a recession. Both are known to be indicators of possible higher demand.
The market will also turn its attention to the meeting of the OPEC, which is to be held on February 1st. Though, it should be noted that a change in the current production targets are unlikely.
