The price of the US Dollar Index declines to 106.18 as traders continue to avoid opening large positions on the Dollar until the market obtains further clarity. Even though the US has received positive news from the labor market, investors continue to push for further clarification with the Consumer Price Index, due to be released tomorrow, and the Federal Reserve, scheduled to speak within the coming days.
One of the major news from the United States is less related to the economy and the financial markets, and more to the current political picture in the country. President Biden’s approval ratings had recently decreased to a record low of 38%. Although, the recent string of healthcare wins that he got in congress are expected to push the ratings higher, it's unclear by how much.
Not to mention that the former POTUS, Donald Trump, has stolen a lot of attention recently when he confirmed that the FBI had raided his home. All of these developments affect the markets as political stability and solidity are known to boost demand in terms of investments. However, economists advise that as long as the story does not develop into something more serious it is not likely to have a significant impact.
One of the most spoken-about currencies this year so far has been the EUR/USD. While the US Dollar is flying high across most pairs, the Euro is being dragged down by instability. Nonetheless, the pair has recently fallen into a recurring price range mainly between 1.0260 and 1.0140. Since yesterday afternoon, the Euro has increased in value against the US Dollar, again climbing up to the range’s resistance level. However, whether the price will maintain momentum will strongly depend on tomorrow’s US inflation figures.
EUR/USD 6-hour price chart on August 9th.
The asset has been unable to form a trend and has remained within a phase of both bullish and bearish corrections. One of the reasons behind these price movements is related to technical factors. The price of the exchange has declined lower than what we’ve seen over the past decade, raising caution amongst investors. At the same time, the instability within Europe, such as the current Italian political crisis, the Ukraine-Russia conflict, and the European energy calamity, has kept investors away.
Recently, the European Council approved a resolution to reduce gas consumption by a minimum of 15% in the coming winter months. In particular, from this August to March of next year. This is part of a group of measures aimed at ensuring the uninterrupted supply of gas to consumers in the event of problems with supplies specifically from Russia. What is specifically worrying for investors is that the resolution includes a savings regime that will affect households, electricity producers, and industries.
The adopted document gives the European Commission the right to declare an emergency throughout the European Union if one or more member states become at risk of having an energy shortage. Generally speaking, the overall scenario has worried investors and significantly contributed to the decline of the Euro.
The NASDAQ has been experiencing a bullish trend since mid-June but has lost momentum over the past 3 trading sessions. The loss in momentum may be related to technical reasons as the price has significantly increased, potentially resulting in investors fearing an overbought market, but also due to the earning season approaching its end.
Currently, the price has declined by 1.70% since last Friday’s market open and by 0.72% during today’s futures trading session. The bearish price movement has not yet crossed previous support levels, nor has a lower price wave been formed. Taking this into consideration, the market is monitoring the price movement accordingly.
NASDAQ 6-hour price chart on August 9th.
One of the latest developments from the stock market is Tesla’s decision to conduct another stock split, which will take place based on a ratio of 3 to 1 this time. As a result, each shareholder will be given 3 shares for each stock owned and the price of the asset will fall according to the stock split. The decision has been taken as a result of the stock climbing significantly over the past month, and the company wishing to protect investor demand. Trading with the new price will start on August 25, immediately after the dividend payment. Traders should keep in mind that this may cause a higher level of volatility.
The growth of the stock market also benefits from the situation in the domestic bond market, since the downward correction has continued this week. This has indicated that the risk appetite of the market is slightly higher than the previous months. However, traders are evaluating whether the market will maintain momentum now that the earning season is approaching its end. If the Federal Reserve continues to raise interest rates, it will definitely affect confidence. According to most analysts, if the central bank raises interest rates to 4%, it has the potential to significantly damage demand.
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