It is the end of the month, quarter-end, and half year. This means there would be a fast change in the risk assets. Many investors would be unaware of the volatility and opportunity which exists in the current markets.
The macroeconomic perspective remains taut and with every step taken by the central banks, one needs to analyze how such inflation reports impact the market. With increased focus on key indicators and strategic trading opportunities, investors can position themselves well to take advantage of movements in stocks and other risk assets shortly.
The following market report highlights the major events that took place in the week, focusing on major indicators, Federal Reserve involvement in the inflation, and key asset classes to follow closely, such as Bitcoin, EUR/USD, NASDAQ.
Federal Reserve Role in Inflation
This week, the Federal Reserve will be able to decide inflation rates substantially moving stock market performance. Recent comments from Fed Chair Jerome Powell suggest that the central bank is highly sensitive to the pressures on the economy, especially regarding the inflation issue. Surely, this week will focus on the core PCE (Personal Consumption Expenditures) price index, the Fed’s primary instrument for measuring inflation. This data release has far-reaching implications:
- When inflation is high, the Fed is likely to keep hiking interest rates, which consequently continues to drive borrowing costs higher for consumers and corporations, and that could also slow economic growth.
- When that inflation reading seems to be softening, the Fed may begin to signal that it’s on the verge of reversing gears, which sends market sentiment running high and sends stocks flying.
Key Market Indicators to Watch
- Core PCE Price Index: It is the primary inflation measure. Any surprise in the data will result in tremendous volatility in the stock market.
- U.S. GDP Growth: Through this week’s release of GDP data, it will be seen how the economy was doing, which might influence Fed policy decisions with interest rates.
- Central Bank Communications: The expectations of the market would be formed by the several statements made by the central bank governors. Stay alert for their views on inflation and growth in the economy.
Market Analysis: Best Assets to Track
Bitcoin
Bitcoin has been on a hot streak since the beginning of the year. The last few bullish candles have been incredibly strong, partly driven by Powell’s confession to the robustness of the cryptocurrency industry. Further profits are also driven by this breakout above significant resistance levels. Here are the major levels to watch:
- Support Level: On a pullback, it might be found support around $27,000.
- Target: A move towards $31,000 is likely in the near term and could be followed by the next significant level at $37,000.
EUR/USD
Another critical pair is Euro vs. U.S. Dollar. Recent developments might hint that a head and shoulders pattern is being formed there, which would indicate the reversal of the trend if some levels are broken:
- Neckline Support: All eyes are now on the support at 1.07496. A breakdown here will take the price down toward the 200-day moving average.
- Buy Opportunities: In case the bearish scenario fails to materialize, look out for a buy opportunity toward 1.109 with the next target being at 1.12.
NASDAQ
The NASDAQ has shown so much more resilience to recent volatility. Here’s what you can consider:
- Triple High Resistance: The Index is nearing a triple high around 15,300. This is a good liquidity zone and could trigger more buying.
- Short-term Target: Let’s watch out for a break above this zone; this might open up targets around 16,500. Liquidity taken out may hurt with potential pullbacks towards mid-14,000.
Conclusion
Engaging Risk-on Assets Seen in the First Half of 2023. It has been a vibrant showing for risk-on assets as we exit Q2, with the macroeconomic landscape still very much jam-packed with potential tradeable opportunities for traders. Huge events like the core PCE release and central bank discussions see to it that vigilance and preparedness are still of paramount importance.
Take this knowledge and apply it to improve your trading strategy for this week. Markets are very dynamic, and by understanding how inflation data and central bank policies mix with each other, you’re going to get a very big advantage.
Don’t forget to check in with the trading room for developing real-time analysis and trade ideas.
