US equity markets keep marching higher as Fed Powell’s semi-annual statement began. The Dow Jones traded briefly above 35,000 points.
Fed Chair Jerome Powell began his two-day-long semi-annual statement, mainly explaining why the Fed is keeping the accommodative measures in place. The US dollar traded with a bearish tone during the North American session, falling across the board.
One may say that so far, this trading week was typical for summer trading. Slow price action in the currency market, a declining dollar, and rising equity prices.
As such, the Dow Jones index traded briefly above 35,000, but it found some sellers at the level. The futures market indicates 34,830 for Dow Jones at the start of today’s London session, while the S&P500 is trading at 4,367 points.
In Europe, the DAX is flat at the opening at 15,788 points. The FTSE 100 index maintains its bullish stance above 7,000 points, helped by strong fundamentals such as the better-than-expected jobs data released today. The claimant count change fell much more than expected, helping the pound and the equity market.
On the commodities front, WTI crude oil holds above $70 – a strong indicator, given that only a drop below $70 would change the view on oil prices. Gold, natural gas, silver and copper extended their recent gains on the back of rising PPI (i.e. inflation on the producer side) in the United States, in a further sign that inflation is not cooling down anytime soon.
The day started with the jobs data being released in the United Kingdom. While the unemployment rate ticked up, seen at 4.8% vs. 4.7% expected, the claimant count change dropped significantly.
Important economic data is scheduled for the rest of the day, such as the Philly Fed manufacturing index and the industrial production in the United States. However, the main event of the day remains Powell’s statement.
Markets to Watch
Dow Jones, USD/JPY, USD/CAD– markets in focus today.
Dow Jones Outlook
The Dow Jones pulled back from the 35,000 area for the second time in two months. If the correction continues, the technical picture suggests a possible double top pattern, although it is too early to consider such a possibility. Bears will be keeping an eye on the 34,250 level – a drop there suggests more weakness is on the cards.
The USD/JPY pair broke the rising trendline that has kept the bullish attitude since the start of the trading year. Now that the trendline is broken, the sentiment is turning bearish, and traders had a great opportunity to enter on the short side a couple of days ago on a retest.
The USD/CAD reacted to the Bank of Canada’s monetary policy announcement yesterday. It bounced from the neckline of an inverse head and shoulders pattern and now the focus shifts to the market’s ability to reach the projected measured move at 1,29.
Winners and Losers
The Japanese yen gained ahead of the Bank of Japan’s decision, while the US dollar remains offered.