Daily Market Report

28/07/2023
10:45

U.S. stocks closed lower on Thursday as investors digested the latest FOMC rate decision. The Dow Jones index fell 0.67% snapping a 13-day winning streak, the 30-stock index was at one positive close away from matching its historic series of consecutive gains registered back in 1897. In the meantime, the S&P500 was down 0.64% while the Nasdaq composite lost 0.55%. A rise in the 10-year yields weighed on the recent stock market’s bullish momentum and with interest rates at highest levels in 22 years, market participants remain cautious about the next monetary policy meeting coming in September. FED officials were unanimous about raising rates and future decisions will depend on changes in economic data. Therefore, uncertainty is likely to continue affecting the market sentiment.

Technically, the Dow faced strong resistance from the 35,700 resistance level as per the chart below and the current drop was due to profit-taking after an extended rally. Therefore, if the current corrective move extends lower in the coming hours, we will be looking at the 35,200-34,950 zone to provide support for prices as the main trend remains bullish.

The second quarter GDP showed rising economic growth as figures came at 2.4% compared to 2.0% registered in the previous quarter which helped the U.S Dollar erasing yesterday’s losses and heading toward another positive week. The Greenback closed higher against a basket of major currencies with EURUSD breaking below the 1.1000 psychological support amid dollar strength and rising interest rates in Europe. The ECB decided to hike rates by a quarter point from 4.00% to 4.25% as widely expected. From a technical standpoint, the trend has turned bearish in the near term after reaching a key resistance located at the 1.1150 level as per our previous report, consequently, prices are likely to extend lower toward the next support which stands at 1.0945. From a wider angle, the single currency should remain supported while prices continue to trade above 1.0830 weekly support.

In the commodity market, gold failed again to overtake the 1985 barrier which led to a larger correction. Yesterday’s drop is expected to be temporary as the yellow metal bigger trend is still bullish while the short-term trend has turned flat. As of today, we will be looking for support between the 1945 and 1935 levels ahead of the weekly close. If gold manages to close above this demand zone, the positive technical picture should remain unchanged, and prices can recover gradually over the coming days. On the flip side, a close below the support zone mentioned above can clear the path for a bearish reversal scenario which can extend the 1910-1900 area.

In addition, WTI crude extended its advance on Thursday, and we will be looking for a potential break above the $80.00 psychological barrier in the coming hours. From a technical standpoint, the WTI crude short-term trend remains positive, and prices are likely to extend higher toward the 81.15 resistance level. On the other hand, any decline is likely to be short-lived as we might see new buyers from the 78.50-77.50 zone if we do see the start of a downside corrective move.

Looking at today’s economic releases, market participants will be waiting for the release of the Core PCE price index from the U.S. which is expected to decline from 0.3% to 0.2%. In the meantime, both personal income and personal spending figures are due to rise. Meanwhile, forecasts are pointing to a higher reading in the Canadian GDP which is expected to rise from 0.0% to 0.3%.

Economic Analyst
Amine Hiani