Daily Market Analysis

12/07/2023
09:19

The U.S. stock managed to resume its advance after facing a three-day decline last week following the jobs report release. All three major indexes closed higher on Tuesday as the focus now is on the latest inflation figures which are due later today. June’s consumer price index is expected to have risen from 0.1% to 0.3%, on the opposite, forecasts are pointing to a drop in the yearly figures which are likely to decline from 4.00% to 3.1%. Today’s inflation data is very important as it will likely define the next move of the FED.

As of now, there is a 92% probability of a 25bps rate hike by the end of this month. However, investors are trying to figure out if this will be the final hike for this year or if there will be more hikes on the way. A rise in inflation coupled with a strong labor market can push the FED to raise interest rates further this year, meanwhile, a slowdown in inflation can push the central bank to ease its current monetary policy. The Dow added more than 300 points yesterday rising by 0.93%, the S&P500 advanced 0.67% while the Nasdaq composite rose 0.55%. One of the strongest stocks that pushed the market to rise on Tuesday was Activision as the shares of the company rose by 10%, in the meantime, Salesforce stocks gained 4% after the decision to increase prices as soon as next month.

In the FX market, the U.S. Dollar remains under pressure as we have seen the greenback extending its decline against a basket of major currencies. Consequently, gold benefited from this situation, and we have seen prices reaching a key resistance zone located between the 1932 and 1937 levels which represents the neckline of the inverted head and shoulders reversal pattern highlighted in our previous report. A break above this zone is likely to confirm a bullish reversal in the yellow metal and we will be looking for another wave higher in the direction of the 1955-1960 resistance zone. On the flip side, a daily close below the 1910 level should cancel the positive scenario and increase the selling pressure again.

Looking now at the latest developments in oil prices, the bullish momentum is rising gradually, and prices are testing an important resistance level located at the $75.00 mark. Moreover, we can see that oil has broken above the falling trendline and managed to create strong support around the 67.00 level in the daily chart. Therefore, an extension higher is likely in the coming days towards the 77.00 / 78.00 zone. On the opposite, if we do see profit taking around the 75.00 barrier, we will be waiting for a retest of the 72.50 support before another rally begins.

In today’s economic calendar, all eyes will be on the latest inflation figures from the U.S. as mentioned earlier. In addition, the Bank of Canada is expected to raise interest rates by 25bps from 4.75% to 5.00% later today, therefore, we expect an increase in volatility in the USDCAD pair. Finally, oil traders will be looking for the release of crude oil inventories.

Economic Analyst
Amine Hiani