Bull rally may not derail that easily
Fed chairman’s testimony could shock the financial markets
US core durable good number may drop to 0.4%
A green start to the week for the cryptocurrency markets
Investors have started to bet once again that the Fed’s monetary policy stance may not be that hawkish and perhaps the bull rally may not derail that easily. The S&P500 index has recovered most of its losses which occurred a few weeks ago and the Japanese markets have climbed to their best level which is not seen in more than three weeks. Looking at the daily chart of the S&P500 index from a technical perspective, the reverse head and shoulder pattern clearly stands out. The projection of this pattern, if fully played out, could easily push the price to another all-time high.
Nonetheless, how aggressive the pace of the monetary policy would be over in the US would remain a chief debate amidst investors. The new Fed chairman’s testimony has the potential to shock the financial markets as investors are not expecting any hawkish stance from him. Mr Powell, the new Fed Chairman, would have to stick to the script and he needs to assure the market that the path for the interest rate hikes would be a gradual one.
For currency traders, traders are wary of placing any large bets ahead of the new Fed Chairman’s testimony and the upcoming US NFP data. The US core durable good number is expected to show a drop to 0.4% from the previous number of 0.7%. Any increase in the purchase orders in this data would send the signal that manufacturers are less wary off interest rate hikes and the business sentiment is strong. We also have the consumer confidence data due later which could bring some swings in the dollar index. The forecast is an improvement in the consumer confidence from its previous reading of 125.4, the forecast is for 126.2.
As for the Euro, the chances are that we may get a break to the upside and provided that the new Fed Chairman does not ruffle any feather, the central bankers’ speciality. Yesterday’s dovish comments by the ECB’s president pushed the euro lower against the dollar, catching out a few overeager bulls. However, at the same time, the president also ruled out any currency war with the US on F.X policy, this leaves the door open for the euro bulls. A strong German CPI number would mean that the ECB would face more pressure from Bundesbank to wind down the tents of easy money sooner than later.
Gold
The precious metal is struggling to hold on to gains despite the weaker dollar. Overall, it does appear that the traders have a bullish bias towards the shinning metal and looking at the overall bets, it appears that traders are planning for an upside move ahead of the Fed chairman’s testimony. Inflation qualms would continue to support the metal as traders use the yellow metal to hedge their risk against inflation.
Cryptocurrency
A green start to the week for the cryptocurrency markets, partly fuelled by Turkey’s proposition of introducing its own national cryptocurrency. Perhaps talks from the European Commission on how to regulate cryptos will provide headwinds to this bullish momentum. However, it generally seems that crypto traders have grown wiser when it comes to filtering what they read about this new asset class in the news.
SKY Gets Another Bid
Sky PLC, a pay television broadcasting service, received another bid but this time not from Rupert Murdoch’s company. Comcast Corp decided that they see a value play in acquiring Sky and the company jumped into the fray by challenging 21st Fox Inc and Walt Disney’s offer. The cash offer of 12.50 pounds per share from Comcast has set the bar really high for Fox.
