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Weekly Market Open - NFP Approaches
30.05.2022

US Dollar

The US Dollar declines on Monday forming its fourth bearish candlestick on most major pairs. Currently, the currency is at a 6-week low. The US Dollar index, which provides traders with the value against 6 major currencies, has also declined this morning by 0.20%, bringing the index back to 101.48. The 99.30 mark is deemed to be significant for the US Dollar, as it has previously been the level where the index found resistance, and could potentially be “flipped” to support.

The performance of the US economy will be under a microscope this week as there are major events that traders will be anticipating and positioning themselves accordingly. This includes the release of the US unemployment rate, employment change and the PMI (Purchasing Manager Index). All are deemed significant enough to potentially impact the US Dollar.

This afternoon we will also see members of the FOMC (Federal Open Market Committee) speak at a European event. The speech will address the possibility of a recession towards the end of the year and what that means for the global economy. This event also has the potential to affect the US Dollar, depending on the tone of the speech and the comments made.

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Equity Markets

The stock market has gained slight momentum after closing its first bullish week in 7 weeks. Following that, DowJones increased by 3.95%, the SNP500 by 6%, and the DAX by 1.99% last week, and the Nikkei225 has increased by 2.20% today.

The market has seen a slight rebound as China records the lowest number of COVID-19 cases since March, and reopens parts of the economy. This is bound to increase supply to companies globally, but it may also increase demand.

The bond market and its correlation with stocks is supporting the equities market. Currently, the reputative 10-year German government bonds are down by 0.80%, while the conservative 20-year-olds are losing 0.16%. Short-term bonds fell most of all: 6-month bonds weakened by 12.92%, and 9-month ones by 3.33%. This could indicate a slight increase in the market’s risk appetite and potentially “dipbuying'', according to Bloomberg.

Oil

Crude and Brent Oil have also performed well over the past week after the market saw support from various factors. During this morning’s Asian session Crude oil has increased by 1.20%, and by over 4% over the past week.

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The price has seen a strong increase due to a possible embargo on Russian energy resources in the Eurozone countries, and the start of the “summer energy demanding” season in the United States.

A potential ban on oil supplies from Russia has not yet been agreed upon due to Hungary's refusal. Nevertheless, the Eurozone countries assure the market that a compromise will be found by the next meeting of the Eurozone’s leaders, which will be held this morning. This has been advised by the President of the European Council and the head of the European Commission.

The main opposer of the ban is Hungary who has vetoed the move for over 4 weeks now. The opposition and concern are triggered by fears that the move will almost certainly increase inflation. Bloomberg has advised that European leaders are trying to agree on a “watered down version”. Either way, the uncertainty has seen an increased price for oil.

Demand for Petrol in the US is rising ahead of the summer season, leading to a reduced inventory. According to the latest data from the Department of Energy, inventories decreased by 1.019M barrels, and Petrol by 0.482M barrels.

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