Market news

Overnight Headlines

*USD reversed its losses from Wednesday closing at 92.99

*US stocks enjoyed more record closes in the Dow and S&P500, Nasdaq higher

*Commodities rebounded making back all the ground from the start of the week

USD strengthened against most majors on strong jobless claims and consensus-beating US producers price index (PPI) inflation data. The latter posted the largest increase in more than a decade. DXY closed higher, printing an “inside” day candlestick. This means daily price range was within the previous day’s high and shows volatility has dropped. EUR is struggling to make ground above the July low at 1.1751. GBP fell towards this week’s support at 1.38 ignoring the inline UK Q2 GDP report.

US equities closed in positive territory. The Dow and S&P500 jumped to record closes, while the Nasdaq closed +0.4%. Sector leadership changed, away from value towards tech and healthcare. Asian markets are generally muted with US futures flat. The fallout from the surging delta variant and the Chinese regulatory crackdown still linger.

Market Thoughts – Dollar drifts but still constructive

With the dollar’s inability to break new ground earlier this week near recent range highs, we are probably set for choppy trading ahead. But the inside day on the DXY is considered a continuation pattern so a move in line with the dominant trend should be expected. There is not currently much of a dollar correction, but it’s more bearish consolidation near the highs/lows.

There has been a notable shift in positioning and more positive sentiment towards the greenback recently in the medium-term. The Fed is moving more obviously towards tapering and markets are seemingly getting on board. Next week’s FOMC Minutes may give us more clues on this.

Chart of the Day – Stocks calm and carrying on

The VIX fell again yesterday and is now trading at 15.59, well below its long-term average of 20. Trading volumes have thinned in typical summer trade and the second quarter earnings season is now winding down after stellar results. That simply means stocks carry on in the same direction of travel. The MSCI’s gauge of stocks around the globe hit a new record high. The Dow and S&P500 closed at record highs for the third straight day with tech stocks taking the lead.

Meanwhile, European stocks equalled their longest winning streak since 2017, closing up 0.1% and extending gains for a ninth consecutive session. The FTSE100 has not joined the record high club just yet, with tech not a huge part of its makeup. But we could be breaking out of recent consolidation on the weekly chart with the MACD turning. A strong close above the mid-June high at 7,217 would see bulls eyeing up January 2020 highs at 7689. Prices have been supported by the 200-week SMA.

Jamie DuttaAnalyst / Trader

"With extensive experience as a full time trader and financial market commentator, I have worked as a trader in top tier investment banks and trading houses, including Morgan Stanley and GAIN Capital trading Forex, Index derivatives. and Bonds. I combine technical analysis with a deep fundamental knowledge to identify trade set-ups. My real life experience allows me to break down the complexities of financial jargon and trading. This means everyone can better understand the compelling forces of greed and fear which are realised every day in countless ways across markets."

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