The US Dollar strengthened against its main competitors after gaining support from positive economic figures. The US Dollar Index is slightly lower this morning but still remains higher than the price ranges seen on Tuesday and yesterday morning. Traders are hoping for a clearer forecast after tomorrow’s NFP and next week’s inflation figures.
Crude oil, on the other hand, has illustrated a clear direction in terms of both technical analysis and macro factors. The price of oil saw a strong increase after OPEC+ defies the West, mainly Washington, by agreeing on a production cut of 2 million barrels per day. This sounds like an extremely high figure, however, investors should note that OPEC has not been able to meet production targets over the past 3 months. Therefore, the actual reduction will most likely be in the region of 880,000 to 950,000 barrels.
Crude Oil 4-hour chart on October 6th
Furthermore, the stock market began the day with a considerable retracement but regained momentum after the US trading session opened. The S&P 500 was able to reach a new monthly price high, but analysts are still concerned about inflation remaining high and another potential jumbo rate hike.
The US stock market specifically gained support from the technology sector. Microsoft added 5.28% in value in just a week, Alphabet gained 4.40%, and Amazon increased by 5.84%. The market sentiment also rose slightly after Elon Musk confirmed his willingness to proceed with the purchase of Twitter for $44 billion.
S&P500 30-minute chart on October 6th
Lastly, cryptocurrencies continue to react to the weaker Dollar and rise in the market’s higher risk profile. Bitcoin has increased by 4.77% and has managed to maintain a price above $20,000 without any significant declines. According to the latest reports, the total market capitalization has remained stable at $945 million. Whereas August and early September saw the market capitalization decline consecutively.
DAX
The German index managed to open on a bullish price gap for the second time this week and has renewed its price highs. This is a similar price movement to that seen in the US, however, the DAX is showing a sizable decline this morning on smaller timeframes. The price is still above average price movements and MAs are still crossed upwards but traders will monitor the movement, remaining cautious of the risk of a European recession which is a stronger reality than across the Atlantic.
DAX 5-Min chart on October 6th
German business activity figures were a big concern for investors. Yesterday, the index for the final services PMI declined from 49.8 to 48.8 and the services index declined from 47.7 to 45.0 points. Stock traders are also concerned about the high level of inflation in Germany, which is at 10%. German inflation has overtaken other smaller EU nations which are more accustomed to high inflation. In addition to this, the ECB is predicted to increase interest rates above the “neutral level” again which can further pressure the German economy and stock market.
On the other hand, the German government has recently confirmed and announced a major fiscal stimulus package to support businesses and consumers. Some analysts have advised that this may assist the DAX in avoiding further significant declines below 10,000.
Today, traders will be monitoring the ECB Monetary Policy Meeting which is scheduled to be released this afternoon. Investors will be looking for indications regarding the size of the next interest rate hike.
Quick Summary:
- Crude oil prices form a clear trend after OPEC confirmed a 2 million barrel cut.
- The actual reduction will most likely be up to 950,000 barrels as OPEC hasn’t been able to fulfill previous production targets.
- The US Dollar Index increases slightly to 111.04.
- The cryptocurrency market has managed to maintain a steady market capitalization for consecutive weeks.
- The DAX remains under pressure from poor German economic figures, despite strong price climbs.
