Market Insights Daily Report: August 2022 Explained

Date of Report: August 25, 2022

Today’s Key Points：

• U.S Durable Goods Order (Lower than expectation)
• Dollar Index (Drop slightly to 108.274)
• Gold (Continue to rise 1755)

Recap of yesterday’s market movement: 

On Wednesday (Aug 24) The U.S. dollar index has drop to 108.274 (-0.70%) The dollar fell in the short term as the US durable goods orders were lower than expected, which proved to reduce US consumer sentiment and deepened the extent of the Federal Reserve’s slowdown in raising interest rates. Gold has rise to 1755 (+0.77%) As U.S. economic data began to gradually come under pressure, yields on U.S. government bonds began to fall, and the dollar was also under pressure, making gold rally. US Crude Oil has continue rise to 95.334 (+2.85%) Saudi Arabia floated the idea of an OPEC+ production cut, causing the crude oil continue to rise. US Stock indexes price closed above, SP500 rise to 4157 (+1.15%), NASDAQ rise to 12997 (+1.45%) Boosted by gains in energy and Intuit shares, Accounting software maker Intuit closed up nearly 4 percent after its upbeat fiscal 2023 revenue forecast and boosted the tech heavy NASDAQ. As Cryptocurrency strong correlation with the stock indexes, causing Bitcoin continue rise to 21900 (+3.64%).

Important Economic Data Calendar

• ECB Monetary Policy Meeting Accounts 
• U.S Prelim GDP q/q

As Europe’s inflation rate will continue to rise, and Russia may stop supplying natural gas to Germany. Europe may face an energy crisis in the future. Therefore, the ECB will continue hawkish statement to pressure on EUR pairs. 

U.S. GDP fell into negative territory for two consecutive quarters, the market expected the economy to enter a recessionary cycle. But U.S. job demand remained strong and tempered recessionary sentiment. Therefore, if this data goes negative again, the Fed will slow down the rate hike and will put pressure on the dollar.

Currency Strength

The minutes of the Fed meeting last week showed that the Fed believes that the inflation rate will remain high, and will continue to raise interest rates until the inflation rate drops to 2%, which indirectly increases the demand for the dollar, and on the contrary, puts a lot of pressure on risk assets (SP500, Cryptocurrency, AUD, NZD) 

From the strength of the currency index, it can be shown that the demand for the US dollar has increased significantly, while the variety that shows the euro continues to weaken. Therefore, we can continue to short the EUR/USD. 

Trading Opportunities 

DXY

Based on recent U.S. economic data, job demand continues to rise, and inflation will remain elevated. In addition, the minutes of the Fed’s meeting showed that the Fed believes inflation rate will remain high, and hinted that it will continue to raise interest rates until inflation falls to 2%. Resulting, significantly increase the demand for the dollar.

In technical analysis perspective, Dollar Index has reach overbought area, causing dollar index to retrace. But according to EMA (Exponential Moving Average) showing strong uptrend momentum. So, we assuming that Dollar Index will continue bullish in the future, dollar index will face strong support around 105.000.

USDJPY

As Japan continues to maintain negative interest rates and monetary easing, the aim is to push up inflation to 2%. Causing the yen to continue its downward trend and as for United States has begun to raise interest rates and tighten monetary policy, resulting in the demand for the dollar continued to rise, creating USDJPY has rise significantly in the long term. Recently, Japan claimed that it would continue to maintain negative interest rates, which led to the continued depreciation of the yen.

In technical analysis perspective, the price action still maintain uptrend. But EMA (Exponential Moving Average) in 1hour time frame showing uptrend momentum. Therefore, we can try to do long around 136.00. 

SP500

Recently, the stock index began to rise gradually. As the market began to digest the information of interest rate hike, the impact on the market also began to decrease. In addition, annual reports from various industries are beginning to show profits, and the sentiment of a recession has also begun to weaken, leading to the upward trend of the stock index. Besides that, the US has continue to raise interest rate of 75 basis point, and Fed claimed that the economy would not fall into recession, it reassured investors and claimed that interest rate hikes would cool down in the future, resulting the stock index to rise.

In technical analysis perspective, we can see that the price action has breakthrough resistant area. Besides that, EMA (Exponential Moving Average) in 4-hour time frame has beginning to show cross above. Therefore, SP500 can try to do long position at 4100. 

DJ30

Recently, the stock index began to rise gradually. As the market began to digest the information of interest rate hike, the impact on the market also began to decrease. In addition, annual reports from various industries are beginning to show profits, and the sentiment of a recession has also begun to weaken, leading to the upward trend of the stock index. Besides that, the US has continue to raise interest rate of 75 basis point, and Fed claimed that the economy would not fall into recession, it reassured investors and claimed that interest rate hikes would cool down in the future, resulting the stock index to rise.

In Technical Analysis perspective, the price action has been breakthrough resistant area. Besides that, EMA (Exponential Moving Average) in 4hour time frame has beginning to show cross above. Therefore, we can try to do long position around 32000. 

HK50

As China begins to open up its economic system and the consumer confidence index gradually rises, the A50 index has a positive correlation with the HK50 index and will drive the rise of the HK50.

In Technical Analysis perspective, the price action has breakthrough 21300 and EMA (Exponential Moving Average) in 4hour time frame showing a strong uptrend as well. Therefore, we can try to do long around 19500. 

BTCUSD

As the probability of future rate hikes and monetary policy tightening by the Fed members was very high, and FED has announced the rate hike from 1.75% to 2.50%, which led to the decline of Bitcoin in short term. Besides that, Investors increasingly concerned about rising raise in the process of tackling rising inflation. Resulting, putting pressure on Bitcoin as well. The market has begun to ease sentiment towards Russia and Ukraine, which will not have much impact on the market. As US Consumer Price Index remains high, Investors assumes Fed will increase interest rate more aggressively. Therefore, putting pressure on Bitcoin. 

According to technical analysis, Elliot Wave Theory shows that currently might enter wave 5, price action has breakthrough strong support area around 29000 indicate strong downtrend momentum. Besides that, in weekly time frame the price has break through EMA (Exponential Moving Average) as well. Therefore, Bitcoin can try to do short position around 24150 area.

CL-OIL

Based on the sharp interest rate hikes by the central banks of various countries, and began to reduce the market demand for commodities, and gradually slowed down consumer sentiment, and gradually increased the economy into recession, also indirectly put pressure on crude oil. In addition, the President of the United States also intends to increase crude oil production, which is also indirectly under great pressure on crude oil. 

In Technical Analysis perspective, price action has continue forming a ranging area. Besides that, EMA (Exponential Moving Average) in 4hour time frame showing cross below indicate that bearish momentum strong. Therefore, we can try to do short position around 100.250.

XAUUSD

As FED raise interest rate from 1.75% to 2.50% and claiming that the economy would not fall into recession, it reassured investors and claimed that interest rate hikes would cool down in the future, causing the dollar index to drop and eventually help gold rise. In addition, the market began to gradually digest the information of interest rate hike, which will weaken the rise of the dollar and provide support for gold.

From the Technical Analysis perspective, price action has breakthrough strong resistant area of 1725. Besides that, EMA (Exponential Moving Average) in 1hour time frame showing cross above indicate that uptrend momentum. Therefore, can try to do long position around 1750.

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