The US dollar index declined to 106.18 as traders continued to avoid opening large positions on the dollar until the market obtains further clarity. Even though the US has received positive news from the labor market, investors continue to push for further clarification with the Consumer Price Index due to be released tomorrow, and the Federal Reserve scheduled to speak within the coming days.
One of the major news from the United States is less related to the economy and the financial markets, and more to the current political picture in the country. President Biden’s approval ratings had recently decreased to a record low of 38%. Although the recent string of healthcare wins that he got in congress are expected to push the ratings higher, it's unclear by how much.
Not to mention that the former POTUS, Donald Trump, has stolen a lot of attention recently when he confirmed that the FBI had raided his home. All of these developments affect the markets as political stability and solidity are known to affect demand in terms of investments.
EUR/USD - Technical View
One of the most spoken-about currencies this year has been the EUR/USD so far, with the US dollar flying high across most pairs and the euro being dragged down by instability. However, the pair has recently fallen into a recurring price range, mainly between 1.0260 and 1.0140.
Since yesterday afternoon, the Euro has increased in value against the US Dollar, again climbing up to the range’s resistance level. However, whether the price will maintain momentum will depend on tomorrow’s US inflation figures.
The asset has been unable to form a trend and has remained within a phase of both bullish and bearish corrections. One of the reasons for the price condition is related to technical factors as the exchange price has significantly declined lower than is usually seen within the past decade, causing caution amongst investors. At the same time, the instability within Europe, such as the current Italian political crisis, the Ukraine-Russia conflict, and the European energy calamity, has kept investors away.
Recently the European Council approved a resolution to reduce gas consumption by a minimum of 15% in the coming winter months. In particular, from this August to March of next year. This is part of a group of measures aimed at ensuring the uninterrupted gas supply to consumers in the event of problems with supplies, specifically from Russia. What is specifically worrying for investors is that the resolution includes a savings regime that will affect households, electricity producers, and industry.
The adopted document gives the European Commission the right to declare an alarm throughout the European Union if a group of States or a specific country is at risk of an energy shortage. Generally speaking, the overall scenario has worried investors and significantly contributed to the decline of the Euro.
NASDAQ - The Technical View
The NASDAQ has been experiencing a bullish trend since mid-June but has lost momentum over the past three trading sessions. The loss in momentum may be related to technical reasons as the price has significantly increased, potentially resulting in investors fearing an overbought market. It is also due to the earning season approaching its end.
Currently, the price has declined by 1.70% since last Friday’s market open and by 0.72% during today’s futures trading session. The bearish price movement has not yet crossed previous support levels, nor has a lower price wave been formed. Taking this into consideration, the market is monitoring the price movement accordingly.
One of the latest developments from the stock market is Tesla's (NASDAQ:TSLA) decision to conduct another stock split, which this time will take place based on a ratio of 3 to 1. As a result, each shareholder will be given three shares for each stock owned, reducing the stock price without affecting the value of the investment.
The decision was taken as the stock rallied over the past month, and the company wishes to preserve investors' interest. Trading with the new price will start on Aug. 25, immediately after the dividend payment. Traders should remember that this may cause a higher level of volatility.
The stock market has also benefited from the situation in the domestic bond market since the downward correction has continued this week. This has indicated that the risk appetite is slightly higher than in the previous months.
However, traders are evaluating whether the market will maintain momentum now that the earnings season's end is approaching. If the Federal Reserve continues raising interest rates, it will affect confidence. According to most analysts, if the central bank raises interest rates to 4%, it has the potential to damage demand significantly.