US Dollar

The market-leading Nasdaq 100 fell as Treasury yields push higher ahead of next week's meeting of the Federal Open Market Committee. Canada’s central bank unexpectedly raised interest rates by 25 basis points, adding to market apprehension on what might come for US rates. Fed Fund futures trading puts just 36% odds of a rate hike on next week's meeting, up from 22% odds yesterday, leading to some profit taking in tech stocks.e Nasdaq 100 fell on profit-taking in tech stocks as Treasury yields push higher ahead of next week's meeting of the Federal Open Market Committee. Canada’s central bank unexpectedly raised interest rates by 25 basis points, adding to market apprehension on what might come for US rates. Fed Fund futures trading puts just 36% odds of a rate hike on next week's meeting, up from 22% odds yesterday, leading to some profit taking in tech stocks.

Stocks were mixed at midday as traders battle the current malaise ahead of next week's Federal Reserve meeting. The VIX, Wall Street’s fear index, moved to new lows suggesting no great concerns. Coinbase, the listed crypto exchange, was sued by the SEC and ten state regulators, a day after competitor Binance faced its ire. Bitcoin and other crypto tokens rallied. China’s economic recovery saw more bad news, but the World Bank remained upbeat on global growth.

Oil prices rallied after news that OPEC+, led by Saudi Arabia, will reduce oil output. Equity, bond and currency markets were largely unchanged as traders look ahead to next week’s Federal Reserve meeting and the outlook for interest rates. Economic data indicated economic growth, but a slower pace. US/China tensions continue to rise over Taiwan and remain an uncertain wild card for markets. Crypto stocks were slammed as the SEC sued exchange operator Binance.

The US Dollar tangled with a trendline for most of the week until sellers made a push on Thursday, with bulls forcing a comeback on Friday after the NFP report.

Smaller and more cyclical stocks in the Russell 2000 index led a buoyant stock market following passage of the debt ceiling bill, sending the measure to President Biden for his signature. Much stronger than expected payroll numbers failed to dampen enthusiasm. Small cap stocks led the rally, taking up leadership from tech stocks. Gold fell back and oil rallied.

In this week’s edition, we discuss the EUR/USD, AUD/USD and USD/CAD forecast and look forward to the macro events in the week ahead.

EUR/USD fell hard and fast, but a reversal starting on the final day of May has so far held through June. Can EUR/USD bulls make this into anything more than a pullback?

US Dollar is poised snap a three-week winning streak as DXY responds to technical resistance- risk for exhaustion. The levels that matter on the weekly technical chart.

The Nasdaq 100 rebounded this morning as traders become more optimistic on an agreement to raise the US debt ceiling, while Fitch became the first rating agency in this cycle to put US debt on negative watch in case it didn’t. Revised GDP data shows that the consumer spent more on goods and services in the first quarter than early reports, and today’s economic data also suggests the economy is gaining momentum and the job sector is still tight. Fed fund futures are now pricing in the likelihood of one to two more rate hikes this year, now becoming baked into market sentiment.

A three-week rally in the US Dollar takes DXY into multi-month downtrend resistance- battle-lines are drawn. Levels that matter on the short-term technical charts.

My colleague Fawad Razaqzada recently noted that the Brent oil price has been testing upwards resistance for several days, but concerns over demand have prevented the bulls from committing to the upside. In recent days the bulls have been given supply side reasons to support an upward move, with news that suggests a tighter oil market in the second half of the year. Could oil move back above $80?

The US Dollar has continued to show strength and EUR/USD is testing a key spot of support at 1.0750. Can Dollar bulls continue to drive FX trends?

The VIX, Wall Street’s fear index, rose to 21 this morning, pricing in fears that the debt ceiling talks don't go well, and/or rates will rise further. Oil prices shone on news that supplies might tighten in the near future, bad news for economic growth and inflation. Today’s release of the minutes of the May Federal Reserve meeting reported significant uncertainty on where rates go next.

The S&P 500 and Nasdaq 100 were off in morning trade, as debt ceiling talks have yet to produce much progress, despite all the positive rhetoric coming from both sides. The Ukraine war looks to be hotting up, with the risk that commodity prices (and so inflation) will spike. Interestingly, the VIX, Wall Street’s fear index, is creeping up and Gold prices, another risk indicator, were unchanged after recent selling.

Debt ceiling talks were the key motivation for gold and silver price slipping this week. After an intraday high of $2,048 per ounce on 10 May, gold fell below the $1,980-$2,000 support level to stand at [$1,960] at the time of writing. The technical position is weakening for gold and silver. Professional and physical market players are not currently prepared to take directional views. For more detailed market commentary go to StoneX Market Intelligence, https://my.stonex.com/.

Wall Street continues to reflect confusion amid contentment, with the tech sector leading, even as debt ceiling talks in Washington remain uncertain. The Nasdaq 100 hit a 12-month high. On the other hand, traders are finally starting to believe that the Federal Reserve may not be finished with rate hikes – and with good reason after comments from Fed governor James Bullard. This week is light on economic data.

We believe that the S&P 500 will experience a correction of at least 10% in the next six months for the following reasons, discussed in this article by our global strategist Vincent Deluard. In a hotter-for-longer economy, rates should stay high for longer, which would be bearish for stocks. The only justification for the fact that S&P 500 index trades for a near-record 20 times forward earnings is that rates will soon fall to zero again. If rate cuts do not come in the second half, we expect multiples to fall to 15 – bring on a more sizable correction.