The market has experienced plenty of volatility during this morning’s Asian session, which normally tends to see less movement. The price of the US Dollar had gained throughout the day yesterday but already fully corrected this morning.
According to Bloomberg, the US Dollar is likely to continue seeing a decline up to the Federal Fund Rate Decision and Press Conference. Investors are uncertain whether the Fed will indicate a change in policy after another consecutive rate hike.
The main news this morning, which is the cause of most of the volatility, is the news from China. It is speculated that China will form a committee for ending the current “Zero-Covid” policy which has been a continuous strain on growth over the past 12 months.
The Hang Seng Index (Hong Kong) has increased by 6.30% and the SSE Composite Index (China) has increased by 2.65%. However, investors should keep in mind that these reports have not been officially confirmed. Still, we can see how speculation has driven the price.
Furthermore, Bitcoin continues to improve as the US Dollar struggles. Over the past 5 days Bitcoin increased by 1.55% bringing the price up to $20,600. Experts advise that the purchase of Twitter by Elon Musk has supported the cryptocurrency industry.
As the world’s richest man and known cryptocurrency supporter, Elon Musk is rumored to have plans to add more crypto features on Twitter. The company has already advised that they will soon release a new feature which allows users to buy and sell NFTs. The total market capitalization of the cryptocurrency market has increased over the past 2 weeks and has almost crossed the $1 trillion mark.
Bitcoin/US Dollar 6-hour chart on November 1st
Lastly, this afternoon investors will be waiting for the release of the latest US Manufacturing PMI and JOLTS Job Openings. Investors are mainly looking to see if the employment sector is continuing to show signs of a slowdown.
DowJones
The DowJones continues to be the best performing US Index and has increased by 0.37% during this morning’s futures session. Over the past month the DowJones has increased by 11%, which is much higher than the S&P 500 which has only increased by just over 5%. This morning the equity market is performing well across the board, including Europe.
The FTSE100 is up 0.77%, DAX 0.55% and the CAC40 (France) is up almost 0.80%. This is partially due to the speculated re-opening of China which significantly increases demand and solves supply disruptions issues but also expectations that monetary policy may pivot in December.
When looking at technical analysis we can see that the price of the DowJones is above all major moving averages and the volume weighted average price. This is an indication that the price is expected to rise, however, traders are concerned that the price is still very close to being overbought on the RSI. The price is also overbought on other indicators, such as the Stochastic Oscillator, but traders are also concerned that the price is at a significant previous resistance point. This resistance point has triggered a decline on two previous occasions.
DowJones daily chart on November 1st
The price of the DowJones has been supported by the earning season where we can see stronger consumer demand in some sectors. The price is also being supported by expectations that global Central Banks will change their policy very soon. Most economists believe the Federal Fund Rate will reach 4.5% before the Central Bank takes a “wait and see” stance.
However, economists have advised that investors shouldn’t price the stock market purely on interest rate hikes. The stock market may still be pressured from weaker economic activity, the cost of debt, and higher inflation. In the meantime, investors will be focusing on comments made by the FOMC tomorrow, as well as the remaining earnings reports.
Quick Summary:
- The US Dollar fully corrected from all its gains on Monday.
- China is rumored to be considering an end to their strict COVID-19 measures.
- The cryptocurrency market is supported by Musk’s takeover of Twitter.
- The Fed potentially coming towards the end of its current policy and decent earnings reports are giving the stock markets a boost.
- Economists advise that the investors shouldn’t price the US stock market solely based on rate hikes.
