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Analysis

The bulls are back in the Wall St.

BY Janne Muta

|June 16, 2023

Yesterday was a strongly bullish day. The S&P 500 index rallied by 1.2% and Nasdaq rose by 1.1%, while Dow Jones Industrial Average jumped higher by 1.3%. The DJIA close at its highest since December. It seems that fund managers are quickly turning around some of their more bearish bets. There have been concerns among money managers about the potential recessionary impact of the Fed’s monetary policy.

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However, recent economic reports indicate greater resilience than anticipated. The most recent data on the labour market and household spending indicate consumers are progressing but at a slower pace. US May retail sales showed an unexpected 0.3% month-over-month yesterday. This follows a 0.4% increase in April and exceeds the anticipated 0.1% decline. So, consumer spending continues to show resilience, even in the face of rather high inflation.

Bonds rallied yesterday, reflecting the market scepticism on Fed’s rate hike hints. The yield on the US 10-year Treasury note closed at 3.727% compared to 3.796% late Wednesday. In Europe, ECB hiked the rates by 25 bp as expected This rallied EURUSD by over 1%, rather a significant move in this currency pair. Gold rallied 0.86% as a result but remained still below key resistance levels.

China's economy has faced challenges lately. In May as industrial output and retail sales growth fell short of expectations triggering more stimulus speculation. Industrial output recorded a growth rate of 3.5% in May y/y. Retail sales, a crucial indicator of consumer confidence, increased 12.7% but the number fell short of the forecasted growth of 13.6%. A number of big banks (UBS, Standard Chartered, Bank of America) are cutting their GDP forecasts for China.

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S&P 500

S&P 500 is bullish above 4346. Below the level, the market probably moves to 4322.

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Nasdaq

Nasdaq is bullish above 15 046. Below the level, the market could move to 14 850.

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AUDUSD

AUDUSD remains bullish above 0.6755. Below the level, the market could move to 0.6731.

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USDCAD

USDCAD is trading at a major (weekly) support level. The 1.3225 is a level that sent the market strongly higher in November last year. If there’s a strong rally above 1.3240, look for a move to 1.3290. Below 1.3210, the market could move to 1.3145.


The next main risk events

  • USD FOMC Member Waller Speaks
  • USD Prelim UoM Consumer Sentiment
  • USD Prelim UoM Inflation Expectations
  • USD US Bank holiday on Monday
  • AUD Monetary Policy Meeting Minutes


For more information and details see the TIOmarkets economic calendar.

Trade Safe!

Janne Muta
Chief Market Analyst
TIOmarkets

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Janne Muta

Janne Muta is a seasoned market analyst and trading educator with a M.Sc. in Finance. His strategies integrate macroeconomics with technical analysis and he shares his knowledge with the trading community.

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