Investors and traders had plenty of time over the weekend to evaluate the signals the global Central Banks provided. Investors mainly had their eyes fixed on the Federal Reserve, Bank of England and the European Central Bank. The most hawkish members, according to economists, were the Federal Reserve and the Bank of England, while most analysts deemed the European Central Bank as dovish.
Nonetheless, the US Dollar Index and other currencies have not yet seen a robust and decisive impulse wave to give a clear direction. However, analysts have noted that the US Dollar Index on Friday and this morning has maintained its value above 104.00. The Dollar Index this morning is trading 0.06% lower, and the Euro is appreciating against all currencies except the Swiss Franc. The Swiss Franc is the best-performing currency during today’s Asian Session and is appreciating against all currencies.
The upcoming economic events will primarily influence the price of both global equities and currencies. Investors will mainly concentrate on European inflation on Wednesday, the US PCE Core Price Index and the US employment data on Friday. On Friday, analysts expect the US employment data to decline for a third consecutive month due to monetary policy pressure. However, earning is expected to continue rising, and the Unemployment rate will remain at 3.5%.
German DAX
The German DAX opens on a bullish price gap measuring 0.10% and has risen by a further 0.23% since the market opened. The price has mainly been driven by its monetary policy since the ECB President’s speech on Friday. President Lagarde would not give a definite signal on interest rates for the upcoming months. However, her global colleagues, including the Fed, gave a more straightforward path forward. Therefore, many economists saw her speech as dovish, and the Euro declined by 0.40% in 60 minutes.
If the ECB continues to indicate further hikes are not likely, the DAX potential can rise further to previous price ranges. However, most economists believe the ECB will be pressured into hiking at least one last time. Wednesday's inflation data will majorly indicate the possibility of interest rate hikes. Analysts expect the German monthly Consumer Price Index to remain at 0.3% for a third month. At the same time, analysts expect Spanish inflation to rise to 2.5%, the highest since May. If inflation data reads lower than these expectations, the DAX can increase further as hikes become less likely. According to Reuters, the chances of interest rate hikes in September from the ECB remain 50/50.
A positive factor for the DAX is the increased investor sentiment after China altered its fiscal policy to support Asian stocks. All Chinese and European stocks are currently higher, indicating a positive investor sentiment. One of the main changes that intrigued traders was that the Chinese government reduced the stamp duty on stocks. However, investors will monitor how US investors will react after the opening of the US trading session. The German DAX trades 0.69% higher, the French CAC 0.87% higher, and the STOXX Europe 600 0.63% higher.
When monitoring technical analysis, the index is neutral, not showing a clear bullish or bearish signal. This is mainly due to the DAX trading at the average price of the impulse wave from August 14th and the average of the latest impulse wave. However, if the price declines below 15,706.1, the index will likely experience a bearish signal. While a price above 15,758.2 can solidify a bullish signal. However, indications on larger timeframes, such as the 4-hour, signaling a downward retracement.
NASDAQ
This week, the NASDAQ has opened on a slight bullish gap, similar to the European market, but has not risen during the futures market. The NASDAQ was affected by a more hawkish central bank but is also influenced by upbeat earnings from major US technology companies. On Friday, the NASDAQ ended the day 0.85% higher than the day’s open price, but the index had also experienced strong bearish waves throughout the day.
Investors are now contemplating how another interest rate hike will affect the stock market over the next 2-3 months. Though, as the Federal Reserve has won much of its war on inflation, the chairmen feel less of a need to confirm if rates will continue to rise. However, the Chairmen said the committee will continue increasing interest rates if necessary. As previously stated, analysts expect the Federal Reserve to hike 25 basis points before the year-end. However, analysts are also advising the chances of a pivot in the first half of 2024 are becoming less likely. Most of the Federal Open Market Committee, including the Philadelphia Fed President, advised that market interest rates must remain higher for longer.
Tomorrow, the index will also be affected by the upcoming economic releases and earnings data. However, no significant events are likely to affect the asset on Monday. Investors will monitor the CB Consumer Confidence, JOLTS JOB Openings and S&P/CS Composite HPI tomorrow. Higher-than-expected data can pressure the index as it supports more interest rate hikes. Additionally, investors will also monitor PDD Holding’s quarterly earnings report. PDD Holdings is the 52nd stock with the highest weight within the NASDAQ.
If the price declines below $14,912 while the depth of the market remains relatively weak regarding buy orders, a bearish signal may rise for the session. Technical analysts also confirm the asset is trading at a previous resistance level and below the longer-term average price.
Summary:
- Economists deem the European Central Bank as dovish compared to their US partners. Globally, stocks rise as China makes fiscal changes to support the trading markets.
- Investors will concentrate on European inflation on Wednesday, the US PCE Price Index and the US employment data on Friday.
- The Fed is expected to increase rates one last time in 2023, but a pivot in the first half of 2024 is becoming less likely.
- Investors will also monitor PDD Holding’s quarterly earnings report. PDD Holdings is the 52nd stock with the highest weight within the NASDAQ.
- If the price declines below $14,912 while the depth of the market remains relatively weak regarding buy orders, a bearish signal may rise for the session.
