WALL STREET SET TO RECOVER AFTER YESTERDAY’S SHARP DECLINE
Global stocks were mixed today after the sudden sell-off yesterday in Wall Street. After starting the day higher, Wall Street stocks declined sharply with the Dow and S&P 500 declining by 600 and 80 points respectively. Technology-heavy Nasdaq had the worst day since 2011 after falling by more than 4%. In China, the Shanghai composite index ended the day largely unchanged while in Japan, the Nikkei declined by almost 4%. South Korea’s Kospi declined by almost 2% after the country’s second quarter GDP numbers missed the consensus estimates. In Europe, Germany’s DAX and EU’s Stoxx rose by 0.60% and 1% respectively.
The euro was little changed against the USD after the ECB monetary policy decision. The bank left rates unchanged as had been expected. They also offered no insights on their ‘through the summer of 2019’ statement. This is when the bank plans to have a rate increase. It also committed itself to halting the asset purchases in December. Then, the bank’s QE will have totaled more than 2 trillion euros. In the statement, the bank said:
The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.
US stocks pointed to a higher open with the Dow, S&P 500 and Nasdaq gaining by 170, 22, and 95 points respectively. This could change as one of the busiest days in the earnings season gets underway. Today, 66 of the S&P 500 stocks and 2 of the Dow are expected to release earnings. Notable companies that will release are Amazon, Alphabet, SNAP, and Chipotle. Twitter reported impressive numbers before the market opened.
Gold price rose sharply today as risk spread across the world. Gold is often seen as a safe haven by many investors because of its role in the world economy. Therefore, when risk rises, gold tends to rise as well. Gold rose as the dollar index rose too. The gains in the US dollar were mostly because of the weakening of the other global peers like euro, Japanese Yen, and sterling.
The price of crude oil remained unchanged today after yesterday’s sell-off. The sell-off yesterday was mostly because of the increased inventory numbers as reported by the American Petroleum Institute (API). The declines were partly offset by the inventory numbers released by the Energy Department. Its data showed inventories increased to 6.346 million barrels. This was higher than the expected 3.694 million but lower than the 9 million released by the API.
Brent crude halted its downward trend today after the inventory data from the EIA. The XBR/USD pair is now trading at the 76.62 level, which is along the 38.2% Fibonacci Retracement level. It is also along the middle line of the Bollinger Bands. Unless there is a major breaking news, the pair is likely to continue its downward trend as confirmed by the ADX indicator below. If it does, it will test the 74.25 level, which is along the 23.6% Fibonacci Retracement level.
The XAU/USD pair rose to an intraday high of 1239 before having a slight decline. This month, the price has risen from a low of 1183 as global risks have risen. The current price of 1232 is along the 14-day EMA on the four-hour chart. It is also below the 28-day EMA. The pair is likely to continue moving up as traders wait for the second quarter GDP numbers, which will be released tomorrow.
The EUR was unchanged against the USD today even after the monetary policy decision from the ECB. The pair is trading at 1.1410, which is slightly higher than today’s intraday low of 1.1380. This slight increase has taken the Chaikin Oscillator almost to the neutral level of zero while the On Balance Volume is at the lowest level since October 17 on the four-hour chart. The pair is likely to continue moving lower and possibly test the 1.1300 level.