Daily Market Report

07/08/2023
08:48

Major U.S. stock indexes ended last week on a negative note following less-than-expected Nonfarm payrolls. The U.S. economy added 187,000 new jobs in July against expectations of 200,000, in the meantime, the average hourly earnings came out higher than forecasts at 0.4% while the unemployment rate fell to 3.5% down from 3.6%.

Moreover, both the S&P500 and the Nasdaq composite retreated on Friday for the fourth consecutive day and registered their worst weekly performance since March.
The S&P500 lost 2.3%, the Nasdaq shed 2.9%, and the Dow Jones declined 1.1%.

Later this week, the focus will be on the latest inflation change in the U.S., the monthly CPI is expected to remain unchanged at 0.2% while the yearly figures are due to rise from 3.0% to 3.3%. It is important to note that during the recent FOMC rate decision, the FED decided to raise interest rates by 25bps and said that it will monitor closely the future economic indicators before defining its future monetary policy.

Technically, major stock market benchmarks were clearly extended to the upside due to better-than-expected corporate earnings and the recent slowdown in inflation. Therefore, a downside correction was highly anticipated by investors. Last week, the Fitch rating agency downgraded the U.S. debt grade for the first time since 2011 which triggered a risk-off environment that led to stock sell-off. Meanwhile, the Dow remains in an uptrend as the daily chart is still showing a series of higher highs and higher lows. The key supports for this week are located at the 34950 followed by the 34500 level. A break below the first support is likely to clear the path for another decline in the direction of the second one before seeing a price stabilization. In the near term, as long as the index continues to trade below the 35500 barrier, the selling pressure is likely to remain in place.

In the FX Market, the U.S. Dollar fell against a basket of other major currencies for the second straight day on a weaker jobs report. The USDJPY currency pair failed to overtake a key resistance located at the 143.50 level as mentioned in our previous report. Moreover, the pair lost a big part of its weekly gains and closed below the 142.00 psychological support.
Therefore, the pair is expected to trade sideways to lower in the coming hours as the corrective move can unfold. The next level of interest stands at 140.70 which represents the low registered on the 31st of July. On the flip side, the 142.30-142.50 is considered the nearest resistance zone for this pair, and the momentum is expected to remain bearish in the short term while prices continue to trade below it.

In the commodity market, gold managed to bounce from an important support zone located between the 1925 and 1930 levels. In addition, a key rising trendline is likely to continue supporting prices as per the chart below which can keep the downside potential limited in gold.
The recent drop should be considered corrective because the main trend remains bullish. From a wider angle, the yellow metal buyers are still preserving the positive momentum while the 1893 low remains in place. In the coming days, we might see demand increasing gradually which can lead to a move back higher in the direction of the 1955 barrier.

Finally, WTI crude managed to recover from early losses as expected after seeing strong buyers from the support zone located between the 79.10 and 78.30 levels. On Friday, prices exceeded the barrier of $82.40 a barrel which reinforces the positive outlook. As of now, the WTI crude short-term trend remains positive, and buyers are expected to target the 83.30 resistance in the coming hours. On the other hand, the nearest support stands at the 81.50 level.

Economic Analyst
Amine Hiani