Stocks faced a downturn for the second consecutive session, driven by declines in major technology firms like Apple, which saw nearly a 3% drop following a report of decreased iPhone sales in China, leading the Nasdaq Composite down by 1.65%. The Dow Jones and S&P 500 also experienced significant losses. Despite the broader tech sector’s struggles, companies such as Target and AeroVironment outperformed expectations, showcasing resilience amidst market reassessment of recent highs driven by AI optimism. Bitcoin’s volatility highlighted the fluctuating nature of digital currencies. Meanwhile, the currency market reacted to weaker-than-expected US economic data, influencing expectations of the Federal Reserve’s monetary policy, with the dollar showing mixed responses against major currencies as the market anticipates key economic updates and Federal Reserve Chair Jerome Powell’s testimony.

Stock Market Updates

Stocks experienced a downturn for the second consecutive session on Tuesday, led by significant declines in major technology companies like Apple, which contributed to pulling the broader market away from its recent record highs. The Nasdaq Composite saw a notable decrease of 1.65%, closing at 15,939.59, primarily due to the downturn in technology stocks. Similarly, the Dow Jones Industrial Average fell by 404.64 points, or 1.04%, ending the day at 38,585.19, while the S&P 500 dropped by 1.02%, to close at 5,078.65. The decline in Apple’s stock, nearly 3%, was sparked by a report from Counterpoint Research indicating a significant drop in iPhone sales in China during the first six weeks of 2024. Other major tech companies, including Netflix, Microsoft, and Tesla, also faced declines around 3% to nearly 4%, with the S&P 500’s information technology sector leading the downturn with a loss of more than 2%.

Despite the broader tech sell-off, some companies managed to buck the negative trend. Target saw its shares jump 12% following a report of strong holiday-quarter earnings that surpassed Wall Street expectations. Similarly, AeroVironment experienced an almost 28% surge after delivering a positive quarterly report and outlook, which exceeded analyst forecasts. These movements occurred as investors are reassessing the market’s recent surge to all-time highs, fueled by optimism surrounding artificial intelligence. Even with the downturn over the past two sessions, the three major stock averages remain significantly higher for the year. Additionally, Bitcoin reached a new record high on Tuesday, though it quickly retreated into the red after surpassing its peak for the first time in two years, highlighting the volatile nature of digital currencies amidst broader market fluctuations.

Data by Bloomberg

On Tuesday, the market saw an overall downturn, with all sectors combined dropping by 1.02%. Despite this general decline, some sectors managed to post gains; Energy led with a 0.74% increase, followed by Consumer Staples and Financials, which rose by 0.34% and 0.13% respectively. However, the majority of sectors experienced losses, with Utilities, Materials, and Communication Services seeing declines of less than 1%. More significant losses were recorded in Health Care, Industrials, and Real Estate, with Consumer Discretionary and Information Technology facing the steepest drops at -1.31% and -2.19%, respectively, indicating a challenging day for these sectors.

Currency Market Updates

In the latest currency market updates, the USD index experienced a slight decline, down by 0.1% during North American afternoon trading, recovering from more significant losses that ensued after the release of weaker-than-expected factory orders and ISM non-manufacturing data. This weaker data has revived market expectations for a potentially more dovish monetary policy path from the Federal Reserve in 2024. As the market anticipates the forthcoming ADP and JOLTS data, alongside Federal Reserve Chair Jerome Powell’s semi-annual monetary policy testimony before the House Financial Services Committee, current market and Federal Reserve dot plot expectations align closely. However, this equilibrium might shift should forthcoming data indicate a softer economic outlook, or if Powell hints at a decreased hesitancy to lower interest rates, potentially affecting yields and pressuring the dollar downwards.

Amid these developments, major currency pairs have shown varied reactions. The EUR/USD pair saw a modest increase of 0.04% in afternoon trading, staying below its peak following the US data release. The muted response suggests traders are cautious, anticipating that the European Central Bank (ECB) might mirror any significant policy shifts by the Fed. Meanwhile, the USD/JPY pair declined to a low of 149.70 after the release of the soft ISM data, influenced by narrowing U.S.-Japan interest rate differentials, which prompted some dollar selling. The GBP/USD pair notably rallied, breaking significant resistance levels, buoyed by the prospect of diverging monetary policies between the U.S. and the UK, particularly in light of the UK’s high inflation rates. Elsewhere, commodities such as Bitcoin and gold recorded new highs before retracting slightly, benefiting from a dip in global yields and indicating a rising interest in USD alternatives amid the current economic climate.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Navigates Uncertain Waters Amid Mixed Central Bank Signals

Following a disappointing US ISM Services PMI report, EUR/USD momentarily reached a two-week high near 1.0880, only to see those gains diminish. Despite a temporary dip, the USD Index (DXY) found some footing, yet remained subdued amid anticipation of Federal Reserve Chair Powell’s testimonies and the upcoming ECB interest rate decision. The currency pair’s fluctuations reflect broader market speculations on future interest rate adjustments by both the Federal Reserve and the European Central Bank, amidst contrasting economic signals from the US and Eurozone. Federal Reserve officials have voiced varying stances on the timing and conditions for rate cuts, reflecting uncertainty in monetary policy directions. Meanwhile, the ECB hints at a possible easing cycle beginning soon, further complicated by mixed inflation data from Europe. These dynamics suggest a potentially stronger dollar in the short term, with EUR/USD possibly facing a downward correction towards its year-to-date lows, amid the backdrop of concurrent monetary easing by both central banks.

Chart EUR/USD by TradingView

On Tuesday, the EUR/USD moved higher and was able to reach the upper band of the Bollinger Bands. Currently, the price is moving just above the middle band, suggesting a potential upward movement to reach the upper band. Notably, the Relative Strength Index (RSI) maintains its position at 52, signaling a neutral outlook for this currency pair.

Resistance: 1.0858, 1.0888

Support: 1.0838, 1.0812

XAU/USD (4 Hours)

XAU/USD Hits Record High Amid Weak US Economic Data and Stock Market Retreat

On Tuesday, Spot Gold surged to a new all-time peak of $2,141.81, buoyed by a combination of softer-than-expected US economic indicators and a downturn in stock markets. The precious metal’s ascent was particularly sparked by disappointing figures from the Institute for Supply Management (ISM) regarding the services sector and a significant drop in January’s Factory Orders. Moreover, the retreat in US Treasury yields, with the 10-year note dipping to its lowest in a month at 4.14%, alongside declines across major US stock indexes, notably a 1.64% fall in the Nasdaq Composite, further propelled gold’s upward trajectory.

Chart XAU/USD by TradingView

On Tuesday, XAU/USD moved higher to reach the upper band of the Bollinger Bands. Currently, the price is moving just below the upper band, suggesting a potential higher movement to reach above the upper band and reach the resistance level. The Relative Strength Index (RSI) stands at 78, signaling a strong bullish outlook for this pair.

Resistance: $2,147

Support: $2,100, $2,079

Economic Data

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CURRENCIES:

US Dollar’s Uncertain Direction Ahead of Key Events

• The US dollar shows no clear trend as it awaits significant US events.
• Federal Reserve Chair Powell’s upcoming testimony to Congress is a potential volatility trigger.

Technical Analysis on Major Currency Pairs

• The article provides a technical outlook for the EUR/USD, GBP/USD, and USD/CAD pairs.

Mixed Performance Against Major Counterparts

• Despite some gains, the US dollar’s appeal is inconsistent, even with rising US Treasury rates boosting it in theory.

Market Caution Due to Packed Economic Calendar

• Traders are wary of taking significant positions due to a busy economic schedule that could increase market volatility, including ISM services data, Powell’s Congressional testimony, and the US NFP report.

Focus on Powell’s Testimony

• Powell is expected to maintain a stance of no immediate need for easing monetary policy, following stagnant progress on disinflation from recent CPI, PPI, and PCE data.

• A hawkish surprise from Powell could raise yields and support the US dollar.

STOCK MARKET:

Stock Market Retreats from Record Highs

• S&P 500, Nasdaq, and Dow Jones Industrial Average saw declines amid investor caution.

• Federal Reserve Chair Jerome Powell’s testimony and upcoming jobs report could challenge recent equity gains.

Impact on Major Indexes

• S&P 500 slightly down, breaking its streak of weekly wins.

• Dow Jones drops by 0.2%; Nasdaq falls by 0.4%, influenced by declines in Apple and Tesla shares.

Tech Sector Rally and Bubble Concerns

• Nasdaq’s recent high fueled by AI-driven tech stock run-up.

• Nvidia’s valuation reaches $2 trillion, raising bubble concerns, though not all analysts are alarmed.

Cryptocurrency and Commodities Performance

• Bitcoin approaches record highs with over 7% gain.

• Gold futures hit a record, with April contracts at $2126.3 per ounce.

• Japan’s Nikkei 225 surpasses 40,000 level for the first time.

Upcoming Economic Indicators

• Powell’s testimony and February jobs data anticipated to influence interest rate decisions and economic outlook.

Regulatory Actions and Market Movements

• EU fines Apple $2 billion over App Store restrictions, impacting its shares.

• Super Micro Computer surges before joining S&P 500; Macy’s stock up after increased buyout offer.

• Spirit Airlines and JetBlue stocks fluctuate following the termination of their merger agreement.

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On Monday, the stock market experienced a modest downturn, with the S&P 500 and the Nasdaq Composite retracting from their peak levels despite the surge in technology stocks, fueled by the artificial intelligence boom. The S&P 500 slightly declined by 0.12%, and the Nasdaq fell by 0.41%, even as Nvidia and Super Micro Computer witnessed notable gains. The broader market’s sentiment was tempered by losses in key sectors and major tech companies like Apple and Tesla. Meanwhile, the currency market showed limited volatility as investors awaited significant U.S. economic updates, including Federal Reserve Chair Jerome Powell’s testimony and non-farm payroll data. The anticipation of these events, coupled with mixed outcomes in the stock and currency markets, underscores the cautious approach of investors amidst the ongoing enthusiasm for AI and technology advancements.

Stock Market Updates

On Monday, the stock market experienced a slight retreat, with both the S&P 500 and the Nasdaq Composite stepping down from their all-time highs, despite significant gains in technology stocks spurred by the artificial intelligence boom. The S&P 500 fell by 0.12% to 5,130.95, the Nasdaq Composite dropped by 0.41% to 16,207.51, and the Dow Jones Industrial Average decreased by 97.55 points, or 0.25%, ending at 38,989.83. This pullback brought the S&P 500 and the Nasdaq back from their recent record highs. Noteworthy performances included Nvidia, which surged by more than 3%, and Super Micro Computer, which soared by 18% following the announcement of its upcoming inclusion in the S&P 500. Additionally, bitcoin-related stocks like Microstrategy and Coinbase saw significant gains as the cryptocurrency approached its 2021 peak, indicating a broader appetite for risk among investors.

Despite the excitement around artificial intelligence and select stock advancements, the market was dragged down by underperforming sectors and notable tech companies. The communication services sector led the S&P 500 lower, with Apple dropping 2.5% after a hefty EU antitrust fine and Tesla declining over 7% after announcing new price discounts. Outside of tech, companies like Ford and Macy’s enjoyed gains due to positive sales data and increased acquisition offers, respectively. However, the airline sector showed mixed results, with JetBlue rising over 4% and Spirit Airlines falling more than 10% after canceling their merger plans. As the market digests these movements amid ongoing AI-driven enthusiasm, investors are keenly awaiting insights from Federal Reserve Chair Jerome Powell’s upcoming monetary policy updates, along with key employment and manufacturing data set to be released throughout the week.

Data by Bloomberg

On Monday, the stock market saw a mixed performance across various sectors, with a slight overall decline of 0.12%. Utilities (+1.65%), Real Estate (+1.07%), and Materials (+0.70%) sectors led the gains, showcasing a stronger performance, while Industrials, Financials, Information Technology, and Consumer Staples also posted modest increases. On the downside, Health Care, Energy, Consumer Discretionary, and Communication Services experienced declines, with Communication Services facing the steepest drop of -1.52%. The energy sector also saw a notable decrease of -1.08% and Consumer Discretionary wasn’t far behind with a decline of -1.27%. This varied performance highlights the differing investor sentiments and economic factors influencing each sector.

Currency Market Updates

In the currency market, the USD index displayed minimal volatility, oscillating between 103.72 and 103.96, as market participants braced for a series of pivotal U.S. economic updates. These include the eagerly anticipated non-farm payrolls data and Federal Reserve Chair Jerome Powell’s testimony to Congress. Comments from Atlanta Fed President Raphael Bostic highlighted a cautious stance on inflation, suggesting the Fed has the luxury of time to ensure inflation targets are met, while also pointing out the potential inflationary pressures from “pent-up exuberance” within the economy. Furthermore, expectations for Federal Reserve rate adjustments, as inferred from SOFR futures, signal a consensus towards a subdued outlook on rate cuts, anticipated to commence in June, with a projection of nearly -80 basis points through the end of 2024.

In currency pair movements, the EUR/USD saw a modest uptick, gaining 0.17% to reach 1.0860, with market sentiment slightly skewed towards potential gains in anticipation of forthcoming U.S. economic data and Powell’s remarks. Meanwhile, the USD/JPY pair experienced a 0.24% rise to 150.50, amidst expectations of diverging monetary policies between the Fed and the Bank of Japan. The GBP/USD pair also recorded gains, increasing by 0.36% to 1.2698, as traders speculated on the Bank of England maintaining a marginally higher interest rate regime compared to the Fed, amid persistent above-target inflation in the UK. In contrast, Bitcoin and gold witnessed significant appreciation, with Bitcoin surging to a new yearly high of $67.6k, driven by ETF-related buying, and gold advancing by 1.6% to $2,117, both reflecting broader market dynamics and investor sentiment.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Reaches Two-Week High Amid Dovish Fed Signals and ECB Easing Prospects

The EUR/USD pair witnessed a notable uptrend, reaching new two-week highs in the 1.0865–1.0870 range, buoyed by the ongoing weakness of the US dollar as the USD Index dipped below the 104.00 mark, despite positive shifts in US yields. This movement was supported by risk-on market sentiment and anticipations of a Federal Reserve easing cycle starting in June, reinforced by comments from Fed officials suggesting a possible reduction in policy rates over the summer. Contrasting views among Fed policymakers highlighted a debate on the timing and conditions for rate cuts. Concurrently, the European Central Bank (ECB) signaled a potential start for its easing cycle in the summer, with inflation data supporting such a move. This comes as 10-year bund yields in Europe showed a declining trend, indicating a complex interplay of expectations and market reactions affecting the EUR/USD dynamics.

Chart EUR/USD by TradingView

On Monday, the EUR/USD moved higher and was able to reach the upper band of the Bollinger Bands. Currently, the price is moving below the upper band, suggesting a potential downward movement to reach the middle band. Notably, the Relative Strength Index (RSI) maintains its position at 56, signaling a neutral outlook for this currency pair.

Resistance: 1.0858, 1.0888

Support: 1.0838, 1.0812

XAU/USD (4 Hours)

XAU/USD Surges Past $2,100 Amid Economic Indicators and Federal Reserve Speculations

Spot Gold exceeded the $2,100 threshold on Monday, continuing its upward trajectory from Friday, albeit at a diminished pace, with a notable $55.00 increase on the last trading day of the prior week, marking its most significant daily gain since December. The ascent began on Thursday following the release of US inflation data, which aligned with expectations and showed a slower annual increase in the Fed’s preferred inflation metric, the January Core PCE Price Index, since March 2021. This was seen as a relief after earlier CPI figures had heightened inflationary pressure concerns. The momentum was sustained into Friday, driven by disappointing US ISM Manufacturing PMI data and a decline in Treasury yields, which pressured the US Dollar further. Despite a minor recovery in yields at the start of the new week, gold’s trajectory remained unaffected, with market participants eyeing the Federal Reserve’s next meeting for potential rate cut signals, not anticipated before June.

Chart XAU/USD by TradingView

On Monday, XAU/USD moved higher to reach the upper band of the Bollinger Bands. Currently, the price is moving just below the upper band, suggesting a potential higher movement to reach above the upper band and reach the resistance level. The Relative Strength Index (RSI) stands at 80, signaling a strong bullish outlook for this pair.

Resistance: $2,120, $2,147

Support: $2,100, $2,079

Economic Data

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Economic news: No notable economic releases.

Earnings: Gitlab (GTLB), Stitch Fix (SFIX), ThredUp (TDUP)

CURRENCIES:

Gold Breakout and Market Volatility Ahead: With central bank decisions and the U.S. jobs report on the horizon, this week is poised for potential market shifts.

Tuesday’s Focus on U.S. Services: The ISM Services PMI for February is expected to show a slight decline to 53.0. Any significant variance could influence the U.S. dollar by affecting FOMC rate expectations.

Central Bank Decisions on Wednesday:

• The Bank of Canada is likely to maintain its current interest rate, with attention on any hints regarding future rate policies.
• Fed Chair Powell’s testimony to Congress will provide insights into the Fed’s monetary policy outlook, particularly regarding rate cuts.

ECB Decision and Powell’s Testimony on Thursday:

• No rate changes expected from the ECB, but a dovish stance could pressure the euro.
• Powell’s second testimony to the Senate, following Wednesday’s address, may not offer new insights.

U.S. Jobs Report on Friday: The nonfarm payrolls report is anticipated to show 200K jobs added in February. Strong job growth could delay the Fed’s rate cuts, affecting the U.S. dollar and gold prices, whereas weak growth could prompt a dovish Fed outlook, potentially boosting gold.

STOCK MARKET:

Stock Market Records: The S&P 500 and Nasdaq ended the week at all-time highs, with the S&P 500 marking a significant rising streak for the first time since 1971, as noted by Deutsche Bank.

Key Events Ahead: The stock market’s rally faces tests with Federal Reserve Chair Jerome Powell’s Capitol Hill testimony and the February jobs report. Additional focus will be on services sector activity and job openings updates.

Earnings Reports: With most S&P 500 companies having reported, notable earnings from Target, Costco, and Kroger are anticipated in the coming week.

Federal Reserve Update: Jerome Powell is scheduled for his semi-annual monetary policy testimony, which will be closely watched for insights on the US economy, inflation, and interest rate cut expectations. Markets anticipate three rate cuts starting in June.

Labor Market Outlook: The February jobs report, highlighting nonfarm payroll additions and the unemployment rate, will be critical. A strong labor market is essential for smooth policy shifts and avoiding a recession.

Earnings Season Wrap-up: The S&P 500 shows a 4% earnings growth in the fourth quarter, indicating the second consecutive quarter of growth. Analysts have made smaller-than-average downward revisions for the current quarter’s earnings estimates.

Market Momentum: Despite expectations of a volatile start to 2024, the S&P 500 and Nasdaq saw their best February since 2015. Historical trends suggest continued positive momentum for the stock market through the year.

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As we step into the week commencing March 4th, anticipation fills the financial sphere for a flurry of significant economic disclosures. Investors and policymakers alike brace themselves for a cascade of reports set to influence the Federal Reserve’s trajectory leading up to the forthcoming FOMC meeting on March 19-20. All eyes are fixed on Federal Reserve Chair Jerome Powell’s semiannual monetary policy testimony before the House Financial Services and Senate Banking Committees, a session historically known as the Humphrey-Hawkins testimony, promising to command considerable attention.  

This testimony is eagerly awaited for any signals indicating shifts in the Federal Reserve’s monetary policy stance. In an environment where the Federal Reserve maintains a firm grip on the federal funds target rate range of 5.25-5.50 percent to rein in inflation and ensure price stability, Powell’s remarks will be scrutinized for any hints of policy adjustments. Despite strides made in controlling inflation, the Fed’s dual mandate urges caution in loosening monetary policy, particularly with the tight labor market’s potential to spur wage inflation. 

Against expectations of tempered economic growth, the imminent Beige Book release holds the promise of offering invaluable anecdotal evidence on economic conditions across the 12 Districts. While recent data suggest a resilient US economy buoyed by robust consumer spending and a strong labor market, striking a balance between nurturing growth and preventing inflation remains a nuanced challenge. 

This week also heralds the arrival of the monthly employment report for February, with analysts projecting a slight moderation in nonfarm payroll growth, yet underscoring the enduring strength of the labor market fundamentals. As businesses grapple with recruitment hurdles, the interplay between job vacancies, wage pressures, and inflation dynamics assumes critical significance for market strategies. 

For forex traders and market analysts at VT Markets, these unfolding events carry paramount importance. The impending economic indicators and Powell’s testimony not only provide insights into the US economic outlook but also wield significant implications for currency markets and trading strategies. As we embark on this pivotal week, remaining informed and adaptable will be imperative for navigating the evolving market landscape. 

Key Takeaways: 

• Fed Chair Jerome Powell’s testimony could offer new insights into the Federal Reserve’s monetary policy direction. 
• The Beige Book and the monthly employment report will provide further clarity on the US economic health and labor market dynamics. 
• Market participants should remain vigilant, adapting their strategies in response to the unfolding economic indicators and central bank policies. 

Stay connected with VT Markets for real-time analysis and insights on how these developments impact the forex market and trading opportunities. 

CURRENCIES:

· Gold prices surged past the $2,040 mark on Thursday, hitting their highest since early February, though the rise was tempered by a strong U.S. dollar.

· The uptick in gold’s value was partly driven by a drop in U.S. Treasury yields, following an economic report that matched expectations. The January core PCE deflator reported a month-on-month increase of 0.4% and a year-on-year rise of 2.8%, aligning with forecasts.

· Market sentiment was influenced by recent CPI and PPI data, leading to concerns over inflation. However, the Federal Reserve’s preferred inflation metric meeting predictions provided a boost to gold investors, encouraging them to increase their positions.

· Future Outlook: Investors should be cautious, as the initial enthusiasm from Thursday’s gold price rally might wane. The slow pace of disinflation and more relaxed financial conditions could lead the Federal Reserve to postpone its monetary policy easing, potentially putting downward pressure on gold prices.

STOCK MARKET:

· Stocks climbed on Friday following positive US inflation data that alleviated concerns over interest rate hikes, leading to record highs on Wall Street.

· Rate-sensitive technology stocks drove gains, with Europe’s Stoxx 600 index rising 0.4% and US equity futures showing increases. The S&P 500 recorded its 14th record of the year, while the Nasdaq 100 reached a new peak, partly thanks to Nvidia Corp’s record close.

· The Federal Reserve’s preferred inflation metric, personal consumption expenditures, rose at its fastest in nearly a year in January, aligning with economists’ predictions. This, along with jobless claims data indicating a softening labor market, boosted market sentiment.

· Treasuries remained stable after two days of gains, and the dollar index showed little change. The yen depreciated against the dollar following comments from the Bank of Japan Governor, hinting at delayed interest rate hikes.

· China’s factory activity contracted for the fifth consecutive month in February, reflecting ongoing demand challenges, despite a rebound in non-manufacturing activity driven by increased travel and tourism.

· The ongoing slump in China’s home sales highlighted persistent issues in the real estate sector, with a 60% decline in new home sales from major companies compared to the previous year.

· The US inflation report supported the view of a continuing disinflationary trend, reinforcing expectations for Federal Reserve rate cuts in 2024.

· Federal Reserve officials expressed varying views on the timing of interest rate cuts, balancing the need to manage inflation with economic strength indicators.

· Bitcoin maintained its value around $61,000, buoyed by significant inflows into BlackRock Inc.’s iShares Bitcoin Trust.

· Oil prices were poised for a slight weekly increase, with OPEC+ considering extending supply cuts, reflecting ongoing market strength.

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On Thursday, the Nasdaq Composite achieved a record close at 16,091.92, its highest since November 2021, driven by a surge in tech stocks, particularly those involved in artificial intelligence. This uplift in the stock market saw the S&P 500 also reaching new heights, alongside modest gains for the Dow Jones, marking a continuation of Wall Street’s positive trend into its fourth consecutive month. The enthusiasm around AI and major tech companies has played a pivotal role in this rally, overshadowing concerns about inflation and economic slowdown. Meanwhile, in the currency market, the US Dollar Index saw an upward movement, influencing major currency pairs and setting the stage for watchful anticipation of upcoming economic data and central bank communications. This complex financial landscape, highlighted by tech stock surges and currency fluctuations, encapsulates the dynamic interplay between equity markets and global economic indicators.

Stock Market Updates

On Thursday, the Nasdaq Composite surged to a record close, marking its first since November 2021, by advancing 0.90% to finish at an all-time high of 16,091.92. This rise was significantly buoyed by a rally in tech stocks and chips. The S&P 500 also reached a new record, increasing by 0.52% to end at 5,096.27, while the Dow Jones Industrial Average saw a modest gain of 0.12%, closing at 38,996.39. This upward movement in the stock market concluded February trading on a high note, extending Wall Street’s positive momentum into a fourth consecutive month, despite concerns over the durability of the AI-fueled rally. The Nasdaq led with a 6.12% gain for the month, followed by the S&P 500 with a 5.17% increase, and the Dow with a 2.22% rise, marking its first four-month winning streak since May 2021.

The resurgence of the Nasdaq has been particularly fueled by a wave of enthusiasm for artificial intelligence, significantly lifting major tech stocks, referred to as the “Magnificent 7” (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla), and subsequently, the broader markets throughout 2023 and into this year. This rally comes after a challenging 2022 characterized by worries over rising interest rates and recession fears. In the specifics of the day’s trading, notable performers included Advanced Micro Devices, which saw a jump of more than 9%, and the VanEck Semiconductor ETF, which closed 2.2% higher. Despite the Federal Reserve’s preferred inflation measure remaining above target in January, it did not exceed Wall Street forecasts, suggesting that consumer spending remains strong. Additionally, while there were setbacks, such as Snowflake’s share drop following the announcement of its CEO’s retirement and disappointing revenue guidance, Okta experienced a significant rise of nearly 23% after reporting strong results.

Data by Bloomberg

On Thursday, the stock market witnessed a positive overall performance with all sectors combined showing a gain of +0.52%. Leading the gains were Communication Services and Information Technology, up by +1.20% and +1.17% respectively, demonstrating strong investor confidence in these sectors. Other sectors such as Consumer Discretionary, Real Estate, and Materials also posted notable increases, ranging from +0.79% to +0.90%. However, not all sectors fared as well; Utilities showed minimal growth at +0.04%, while Financials slightly declined by -0.01%. The Consumer Staples and healthcare sectors faced downturns, decreasing by -0.29% and -0.73% respectively, indicating areas of investor concern or profit-taking.

Currency Market Updates

The currency market experienced notable movements, with the USD Index (DXY) advancing above the 104.00 barrier, marking its third consecutive session of gains. This strength in the US Dollar influenced various currency pairs, notably pushing the EUR/USD pair to challenge the key support level at 1.0800. The anticipation of economic data releases, including the final S&P Global Manufacturing PMI, Construction Spending, and the ISM Manufacturing PMI, alongside speeches from several Federal Reserve officials, seems to underpin the dollar’s momentum. Furthermore, the currency market is keenly awaiting inflation figures from the euro area, alongside unemployment and manufacturing data, which could influence the EUR/USD trajectory in the coming sessions.

On the other side of the spectrum, the GBP/USD pair faced downward pressure, hinting at a potential move towards the 1.2600 region, influenced by a stronger dollar and upcoming economic releases from the UK. Meanwhile, the USD/JPY pair saw a decline to the 149.20 area, reacting to market speculations about a potential policy shift by the Bank of Japan. The AUD/USD pair also succumbed to the dollar’s strength, breaking below the 0.6500 support level amid concerns over China and forthcoming economic data from Australia. Additionally, the market focus is shifting toward China with the upcoming Manufacturing PMIs, which could have significant implications for the global currency markets, highlighted by a slight drop in the USD/CNH pair to the 7.2100 zone. Amidst these currency shifts, commodities such as WTI oil and precious metals like gold and silver displayed varied performances, adding another layer of complexity to the global financial landscape.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Dips Amidst USD Rebound and Rate Cut Speculations

The EUR/USD pair has seen a downturn for the third consecutive session, touching the 1.0800 level as the US Dollar gains strength, driven by renewed interest from investors. This movement is in sync with the rising US Dollar Index (DXY), surpassing the 104.00 mark, despite a drop in US yields. The Dollar’s resurgence, after a brief dip following US PCE data indicating disinflation, was bolstered by Atlanta Fed President Raphael Bostic’s remarks on the stubborn path to the 2% inflation target and the potential for a policy rate reduction in the summer. Concurrently, both US and German bond yields experienced a decline amid anticipations of a Federal Reserve rate cut, possibly in June, with a 52% probability as forecasted by the CME Group’s FedWatch Tool. This is paralleled by the ECB’s openness to initiating its easing cycle, hinted at for a June start by board member Peter Kazimir, amidst signs of waning inflation in Germany and ahead of crucial CPI data for the eurozone that could influence ECB rate cut timings.

Chart EUR/USD by TradingView

On Thursday, the EUR/USD moved lower and was able to reach the lower band of the Bollinger Bands. Currently, the price is moving below the middle band, suggesting a potential upward movement to reach above the middle band. Notably, the Relative Strength Index (RSI) maintains its position at 47, signaling a neutral outlook for this currency pair.

Resistance: 1.0832, 1.0858

Support: 1.0812, 1.0783

XAU/USD (4 Hours)

XAU/USD Surge Amid Disinflation Confirmation and Rate Cut Speculation

Following the release of the Core Personal Consumption Expenditure (PCE) Price Index, which met expectations and indicated ongoing disinflation, gold prices experienced a significant increase of over 0.50% during Thursday’s North American trading session. This data release led to a decrease in US Treasury bond yields, inversely benefiting the price of gold, propelling XAU/USD to $2,046. The anticipation of the Core PCE report, showing a year-on-year deceleration in inflation for January, alongside a sharp decline in headline inflation, fueled expectations of potential rate cuts by the Federal Reserve. Market predictions, influenced by the CME FedWatch Tool, now foresee a higher likelihood of a rate cut by June, contributing to the bullish momentum in gold prices amidst a broader analysis of economic indicators such as Initial Jobless Claims and Pending Home Sales.

Chart XAU/USD by TradingView

On Thursday, XAU/USD moved higher to reach the upper band of the Bollinger Bands. Currently, the price is moving just below the upper band, suggesting a potential higher movement to reach above the upper band and reach the resistance level. The Relative Strength Index (RSI) stands at 63, signaling a bullish outlook for this pair.

Resistance: $2,056, $2,065

Support: $2,039, $2,030

Economic Data