Thread: Daily Market Analysis from ForexMart

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Keynote speech by Fed Chairman Jerome Powell

The euro and the British pound continue to strengthen against the US dollar amid weak fundamental statistics coming from the United States recently. However, today we are anticipating a more interesting event: a speech by the Federal Reserve Chairman on Capitol Hill. Today marks the first of two speeches before Congress. Powell will first speak at the House Financial Services Committee and then repeat a similar speech at the Senate Banking Committee tomorrow. It is expected that legislators will pose a number of important questions to him, concerning not only the economy and monetary policy but also the operation of the banking system.
The discussion will include the widely criticized proposal by the Federal Reserve to increase capital requirements for large banks. However, the cost of borrowing will also be an important issue on the agenda.

Since July 2023, the Fed has maintained interest rates at their highest level in the last two decades, making access to credit increasingly difficult for many Americans. This affects purchases of homes and cars, not to mention servicing credit card debt.

Lately, Democrats have sharply criticized Powell's actions. Senators Sherrod Brown and Elizabeth Warren have called on the Fed's head to lower interest rates soon, arguing that there is no longer a need for such a strict approach. Although recent inflation data suggest otherwise, many dovish policymakers consider the inflation spike to be temporary.

It is clear that even against the backdrop of slowing economic growth, the Fed is in no hurry to make changes to interest rates. The labor market remains strong, and the monthly inflation rate in January this year was much higher than economists' expectations. Persistent concerns about price pressure have rallied central bank representatives who are convinced that additional evidence is needed that inflation is firmly moving towards the 2% target before starting a cycle of lowering interest rates.

Some experts note that the longer the Fed delays the rate cut, the higher the chances that they will be lowered by the November presidential elections, which are almost certain to be a rematch between President Joe Biden and former President Donald Trump.

While Fed representatives have repeatedly stressed that their decisions were independent of politics, lowering interest rates closer to election day could lead to sharp criticism of the Central Bank's work from Trump and the Republicans. Obviously, lowering rates at the time of presidential elections would benefit the Democrats and Biden, which they will surely take advantage of.

As for the euro/dollar pair, demand for the euro persists after a series of weak statistics from the US. Now, bulls need to think about how to push the price to 1.0875. This will allow them to test 1.0900. From there, the pair may reach 1.0930, but doing so without support from major players will be quite challenging. The next target is the peak of 1.0965. If the trading instrument declines to 1.0835, I expect some serious actions from major buyers. If they do not take action, it would be wise to wait for the pair to hit the low of 1.0790, or to open long positions from 1.0760.

As for the pound/dollar pair, bulls need to drag the price to the nearest resistance at 1.2730 to start an uptrend. This will allow them to target 1.2770, above which it will be quite difficult to break through. The next target is the area of 1.2800, after which we can talk about a more rapid surge to 1.2830. In case of a decline, bears will try to take control over 1.2690. If they succeed, breaking through this range may push the pair towards the low of 1.2660 with the perspective of reaching 1.2630.

For now, I am still delving into both technical and fundamental analysis, as I find both factors to be highly crucial. That's why I am continually developing my understanding of these aspects, aiming to trade to the maximum potential with Tickmill as my broker.

US election: Wall Street at a crossroads

The S&P 500 and Nasdaq indices ended the trading session in the negative on Friday, retreating from the record highs reached during the day. This decline occurred against the backdrop of a decline in the sector of chip manufacturers and mixed data on the labor market, reflecting the exceeding of expectations for the number of jobs created while the unemployment rate rose.

During the trading session, the S&P 500 and Nasdaq indices briefly hit all-time highs, but by evening their dynamics changed to decline. The Philadelphia Semiconductor Index (.SOX) experienced a noticeable drop, losing 4% by the close of the day after earlier reaching the day's high.

Shares of Nvidia (NVDA.O), highly regarded in the market for its contributions to the development of chips for artificial intelligence, suffered a 5.6% loss, ending their six consecutive sessions of gains. This was despite the fact that they were up more than 5% in early trading.

Broadcom (AVGO.O) shares in the chipmaker index also experienced a significant decline of 7%, driven by low investor expectations for the company's full-year outlook. In addition, Marvell Technology (MRVL.O) lost 11.4% in value after its first-quarter guidance fell short of market expectations due to weaker demand.

The stock posted gains at the open after data showed that U.S. job growth accelerated in February, with job openings in the nonfarm payroll sector rising by 275,000, exceeding analysts' forecasts for a gain of 200,000. At the same time, the January jobs data was downwardly revised.

There is also an increase in the unemployment rate in February to 3.9% compared to the previous figure of 3.7%, which was maintained for three months. It should be noted that the rate of wage growth fell to 0.1% on a month-over-month basis.

Brian Price, head of investment management at Commonwealth Financial Network, highlighted a trend toward more restrained spending on the part of consumers. This is reflected in shares of Costco Wholesale (COST.O), which posted a 7.6% decline as its quarterly sales volumes fell short of expectations due to moderate demand for higher-priced goods.

Nevertheless, Price emphasized that overall market sentiment remains optimistic with the anticipation of continued growth in the absence of any negative factors.

He expressed his belief that the market is focused on the continuation of the favorable situation: inflation is expected to be maintained at a moderate level and the Federal Reserve is expected to initiate a policy of easing economic conditions.

Upcoming data for February, which will be released next week and include information on the consumer price index (CPI) and retail sales, will provide additional information that could influence the assessment of the possibility of lowering interest rates.

In a speech on Thursday, Jerome Powell, chairman of the Federal Reserve, shared his view that the central bank is nearing the point where it is confident enough that inflation is falling, allowing it to begin the process of lowering interest rates.

While investors continue to analyze possible profits and keep an eye on monetary policy, they are also beginning to consider a new factor that could significantly impact market conditions this year - the upcoming U.S. presidential election in 2024.

In an address to the nation on Thursday, US President Joe Biden put forward a proposal to raise corporate taxes, while his predecessor and potential Republican Party rival, Donald Trump, earlier in 2017 passed legislation aimed at cutting taxes for companies and the wealthy. Biden also expressed pride in U.S. economic achievements during his presidency.

It is difficult to determine how politicians' proposals and initiatives ahead of the election will affect asset market prices. The winner of the election is likely to face the challenge of dealing with a divided Congress, which could significantly complicate any legislative initiatives.

This uncertainty does not stop analysts from trying to assess how political changes may interact with other key elements influencing market dynamics. Such factors include increasing interest in the business outlook for artificial intelligence and adjusting expectations about when the Federal Reserve might begin easing monetary policy. The S&P 500 Index (.SPX) has made notable gains, up 7.4% YTD and near all-time highs.

Polls show a tight contest between the 81-year-old Biden and 77-year-old Trump. Despite the U.S. economy performing better than most advanced economies, the American people generally express higher confidence in Trump's economic competence in polls.

As part of his speech on Thursday, Biden unveiled an initiative to impose a 21% minimum tax on the profits of corporations whose revenues exceed $1 billion, building on the provisions of the 2022 Clean Energy Act.

In addition, he expressed his intention to reinstate his "billionaires tax" initiative, which would impose a minimum tax of 25% on the income of U.S. citizens whose wealth exceeds $100 million.

Analysts note that the Republicans' success in the elections is likely to entail an extension of the 2017 tax cuts, which could lead to higher inflation. At the same time, the Democrats' victory will result in an increase in tax rates for households and corporations with high income.

The Dow Jones Industrial Average (.DJI) index of industrial companies closed down 68.66 points, or 0.18%, stopping at 38,722.69. The S&P 500 Index (.SPX) fell 33.67 points, or 0.65%, to settle at 5,123.69, while the Nasdaq Composite (.IXIC) fell 188.26 points, or 1.16%, to 16,085.11.

Among the 11 key sectors in the S&P 500, the technology sector (.SPLRCT) posted the largest decline, losing 1.8%. It was followed by the consumer staples sector (.SPLRCS) with a 0.8% drop, where Costco made a significant contribution.

Over the past week, the S&P 500 Index declined 0.26%, the Nasdaq fell 1.17%, and the Dow Jones lost 0.93%.

Meanwhile, real estate stocks (.SPLRCR) were the biggest gainers, rising 1.1%. Behind them are shares of energy companies (.SPNY), which grew by 0.4%.

Shares of Gap (GPS.N) jumped 8.2% as the retailer beat Wall Street analysts' forecasts for fourth-quarter results. That was due to increased demand for a revamped assortment of Old Navy and Gap-branded merchandise during the holiday season, as well as lower volumes of discounted merchandise.

On the New York Stock Exchange, the number of stocks that increased in value outnumbered those that declined by a ratio of 1.25 to 1, with 708 new highs versus 48 new lows.

On the Nasdaq exchange, the number of stocks that increased totaled 2,086, while 2,192 declined, showing a predominance of declining over rising stocks with a ratio of about 1.05 to 1.

The S&P 500 index marked 65 new 52-week highs and recorded no new lows, while the Nasdaq recorded 351 new highs and 83 new lows.

Trading volume on U.S. exchanges reached 12.29 billion shares, which compares with an average of 12.08 billion over the past 20 sessions.

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Wall Street's decline driven by tech sector and Fed rates

The global stock index also showed a decrease on Friday, setting a course for a weekly decline after seven consecutive weeks of gains, while the dollar strengthened, heading for its most significant weekly gain since mid-January as the latest US inflation data fueled new hopes for interest rate cuts.

Data released on Friday showed a slight increase in US import prices in February, as the rise in the cost of petroleum products was partially offset by modest growth in other areas, suggesting an improvement in the inflationary landscape.

Stocks this week faced challenges after US consumer and producer price data indicated that inflation remains persistent, dampening expectations that the Federal Reserve would cut rates by its June meeting.

Market assessments of a Fed rate cut of at least 25 basis points in June stand at 59.2%, down from 59.5% in the previous session and 73.3% a week ago, according to CME's FedWatch Tool.

The central bank is expected to maintain interest rates at its meeting next week, but investors will closely monitor the central bank's economic forecasts, including interest rate projections.

On Wall Street, the Dow Jones Industrial Average (.DJI) fell by 190.89 points, or 0.49%, to 38,714.77, the S&P 500 (.SPX) lost 33.53 points, or 0.65%, to 5,116.95, and the Nasdaq Composite (.IXIC) dropped 155.35 points, or 0.96%, to 15,973.17.

Over the week, the S&P 500 lost 0.13%, the Dow dropped 0.02%, and the Nasdaq decreased by 0.73%.

Additionally, a study by the University of Michigan showed its preliminary consumer sentiment and inflation expectations data barely changed in March, while a separate report indicated that US factory production in February increased more than expected.

Adobe (ADBE.O) shares fell by 13.7% the day after the company forecasted second-quarter revenue below analysts' estimates, citing competition and weak demand for photos, illustrations, and videos integrated with artificial intelligence.

Among other declining stocks, Ulta Beauty (ULTA.O) shares fell by 5.2% after its projected annual profit came in below Wall Street estimates, as rising supply chain costs and intensified promotional activities negatively impacted its profits.

The S&P 500 technology index (.SPLRCT) dropped by 1.3% for the day, leading the downturn among sectors. Shares of Microsoft (MSFT.O) fell by 2.1%, marking one of the index's most significant declines.

The semiconductor index (.SOX) decreased by 0.5% on Friday, registering its most significant weekly percentage drop since the beginning of January. Announcements related to AI at Nvidia's (NVDA.O) GTC developers conference, scheduled for March 18-21, will be closely watched.

The Russell 2000 index of small-cap companies (.RUT) fell by 2.1% for the week.

Friday's volume was the highest of the year on US exchanges, with 18.76 billion shares traded. The average full-session volume over the last 20 trading days was about 12.4 billion.

Although Wall Street's AI-driven growth has stalled, the S&P 500 index has continued to rise by 7.3% since the beginning of the year.

According to data released on Friday, US factory production in February grew more than expected, but the January figure was sharply revised downwards, as production continues to be constrained by higher interest rates.

The dollar index gained 0.05% to 103.43, recovering some of the previous week's decline with a 0.71% increase, while the euro rose 0.06% to $1.0889 for the session. The sterling weakened by 0.13% to $1.273.

Against the Japanese yen, the dollar strengthened by 0.49% to 149.05, despite expectations that the Bank of Japan is expected to end its negative interest rate policy at its meeting next week.

The MSCI global stock index (.MIWD00000PUS) fell by 5.07 points, or 0.66%, to 767.58, heading for its third consecutive daily drop, the longest streak since the beginning of the year, and a 0.48% decrease for the week.

The STOXX 600 index (.STOXX) closed down by 0.32%, while the broader European index FTSEurofirst 300 (.FTEU3) fell by 7.42 points, or 0.37%.

The yield on benchmark 10-year US Treasury bonds rose by 1 basis point to 4.308% after reaching 4.322%, the highest level since February 23. The yield on 10-year bonds this week jumped by 22 b.p., the most significant increase since mid-October.

The yield on 2-year Treasury bonds, which typically moves in step with interest rate expectations, rose by 3.9 basis points to 4.7297% and increased by 24.6 b.p. for the week, marking the biggest jump in two months.

Oil prices fell a day after exceeding the $85 per barrel mark for the first time since November. Oil indices finished the week with a growth of more than 3%. U.S. crude oil decreased by 0.27% to $81.04 per barrel, and Brent crude fell by 0.09% to $85.34 per barrel.

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The main events by the morning: March 26

Bitcoin has returned to the area above $71 thousand. A day earlier, investment guru Jim Roger said that the cryptocurrency would collapse to zero. He does not see any long-term value in it, believing that the crypt will disappear.

The United States has imposed sanctions against Russian operators of CFA and blockchain services. In the list: Atomize, Lighthouse, Distributed Registry Systems, Web3 Tech, B-Crypto, Netexchange, Masterchain.

The Cabinet of Ministers of Russia ordered the sale of 27.5% in the Sakhalin-2 operator company for 95 billion rubles. Gazprom's daughter Sakhalin Project will buy a share, TASS reports.

France may come into direct conflict with Russia in the event of the defeat of the Armed Forces of Ukraine. The LCI channel claims that there are several scenarios for the entry of French troops into the territory of Ukraine, including the deployment of NATO troops in fortified areas and trenches of the Armed Forces of Ukraine, as well as the possible construction of a military plant in Kiev or the deployment of troops in Odessa.

Hamas has confirmed its unwillingness to make concessions. According to Reuters, the Palestinian movement informed the mediators that it would insist on a complete ceasefire in the Gaza Strip, as well as demanding the complete withdrawal of the Israeli military from the region and a «real exchange» of prisoners of war.

The March package of assistance to Ukraine from the United States in the amount of $300 million was used back in November. According to Politico, a representative of the American administration said that these funds are currently «not available for use,» and the approval of assistance was rather a symbolic gesture.

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On the verge of inflation: how the Dow Jones and S&P reacted for the third session in a row

On Tuesday, amid expectations of important economic releases during the short holiday week, US stock markets fell, marking the third consecutive decline for the Dow Jones and Standard & Poor's 500 indexes. Investors are in a wait-and-see mood as they analyze potential changes in Federal Reserve policy.

Tesla (TSLA.O) rose 2.92% on CEO Elon Musk's announcement that he would test self-driving technology for the company's vehicles, available to both new and existing customers in the United States. Over the current week, the stock price has increased by about 4%, although during the year their quotes have decreased by more than 28%.

Market participants are particularly focused on the Personal Consumption Expenditures (PCE) price index, the Federal Reserve's main tool for assessing inflation. It is expected that the latest data on this indicator will be published on Friday, a day when trading on American exchanges will not be held due to the celebration of Good Friday.

It is predicted that in February the inflation index will increase by 0.4%, reaching 2.5% at the annual level. Meanwhile, core inflation, which excludes volatile items such as food and energy, is expected to rise 0.3% for the month, keeping annual growth at 2.8%, according to expert forecasts.

"Friday is key. All attention will be focused on this day, and any events before then will be perceived as background. Therefore, we should not expect significant changes in the market until the data is published," said Stephen Massocca, deputy president of Wedbush Securities. San Francisco.

"It would be extremely risky for the market if there were any speculation that Fed rates have not yet peaked. Any hint from the Fed that interest rates could be raised further could signal an immediate shift away from risk assets."

The U.S. economic sector is growing, with February orders for durable goods exceeding forecasts and equipment investment pointing to the start of a recovery. According to the Conference Board, consumer confidence remained virtually unchanged in March at 104.7.

The Dow Jones Industrial Average lost 31.31 points, down 0.08%, to 39,282.33. The S&P 500 was down 14.61 points (down 0.28%) at 5,203.58, while the Nasdaq Composite was down 68.77 points (down 0.42%) at 16. 315.70.

Last week, all three major US indexes hit new all-time highs after the Federal Reserve confirmed its forecasts for three interest rate cuts this year.

Market expectations for the Fed to cut rates by at least 25 basis points in June continue to rise, now reaching 70.4% probability according to CME's FedWatch tool, up markedly from last week's 59.2%.

Shares of the media and technology group linked to Donald Trump rose 16.1% to close at $57.99 after temporarily hitting $79.38 on the first day of trading following its reverse merger with the company. , specializing in the issue of securities.

McCormick (MKC.N) jumped 10.52% to become the top gainer in the S&P 500, as its first-quarter sales and earnings beat market expectations.

Shares of Seagate Technology (STX.O) also posted strong gains, rising 7.38%, after analysts at Morgan Stanley upgraded the hard drive maker's stock from overweight to overweight.

At the same time, United Parcel Service (UPS.N) shares lost 8.16% following the release of the company's 2026 guidance.

On the New York Stock Exchange, decliners outnumbered advancers by a 1.24-to-1 ratio. A similar trend was seen on the Nasdaq, where decliners outnumbered advancers by a 1.34-to-1 ratio.

Trading volume in US stock markets reached 10.43 billion shares, less than the average volume of 12.23 billion shares over the past 20 sessions. Trading activity is expected to remain moderate throughout the current week, and as the holidays approach, volumes may decline further.

The pan-European stock index STOXX 600 gained 0.24%, while MSCI's index of Asia-Pacific shares ex-Japan closed 0.25% higher at 535.59.

Market attention is focused on the Japanese yen, which remains at its weakest against the dollar since 1990 despite the Bank of Japan raising interest rates last week for the first time in 17 years.

The dollar strengthened 0.1% against the yen to hit 151.56, raising the risk of Japanese intervention to prevent further weakening of its currency. In October 2022, the dollar/yen exchange rate rose to 151.94, followed by a decline due to intervention.

Japanese Finance Minister Shunichi Suzuki on Tuesday expressed readiness to consider options to stabilize the yen, reiterating statements made the day before by the country's top monetary policy official.

The US dollar was marginally weaker, down 0.06% at 7.248 against the offshore Chinese yuan, which strengthened thanks to an unexpectedly high trading range setting. The yuan's fall the previous Friday, after a period of market volatility, had sparked concern among investors, with some speculation that China could loosen controls on its currency, allowing it to fall.

Spot gold rose 0.24% to $2,176.69 an ounce, while U.S. gold futures rose 0.09% to $2,176.80 an ounce. In the cryptocurrency space, Bitcoin lost 1.74% to $69,753.73, while Ethereum fell 1.55% to $3,572.7.