US stocks ended the day at record highs as investors continued to cheer the recent Federal Reserve dovish view. The S&P, which is an index comprised of the biggest 500 American companies ended the day 0.9% higher while the Dow rose by almost a percentage point. The tech-heavy Nasdaq index rose by 0.8%. These gains happened as traders placed their bets that the Fed has their back no matter what happens in the trade front. At the same time, US government bonds declined to the lowest level since 2016 while the dollar index declined by 0.5%. Gold rose to a six-year high.
Sterling rose slightly after the Bank of England (BOE) delivered its interest rates decision yesterday. The bank pointed towards a gradual rise in interest rates, resisting the dovish view expressed by other central banks like the ECB and the Federal Reserve. All this happened while investors are not aware of who will replace Theresa May as Prime Minister. Indications point to Boris Johnson, who has vowed to take the country out of the EU with or without a deal.
A day after the BOJ left rates unchanged, the Japanese yen continued to strengthen against the USD. Earlier today, the country released inflation and manufacturing data. In May, the core CPI, which removes volatile products like food increased by 0.8% in May. This was lower than the expected gain of 0.9%. The headline CPI rose by 0.7%, which was lower than the 0.9% reported in April. At the same time, the core-core CPI, which removes food and energy products rose by 0.5%, easing from the previous 0.6%. In addition, the country’s manufacturing activity slowed in June. The Nikkei-Markit flash manufacturing PMI declined to a three-month low of 49.5 from the previous 49.8. A figure below 50 is an indication that activity is shrinking.
Later today, investors will receive the manufacturing, composite, and services PMI data from France, Germany, US and the European Union. They will also receive the Canadian retail sales, US existing home sales, and the Baker Hughes rig count data.
EUR/USD
The EUR/USD pair rose in the Asian session to a high of 1.1300. On the hourly chart, this price was above the 61.8% Fibonacci Retracement level and above the 28-day and 14-day moving averages. The RSI has continued to rise and is currently slightly below the 70 level. The accumulation/distribution indicator has continued to move up. The pair will likely continue to move higher, to test the important support of 1.1350.
USD/JPY
The USD/JPY pair continued to decline, even after the weak manufacturing and inflation numbers from Japan. The pair reached a low of 107.04, which is slightly above the important support level of 107.00. On the four-hour chart, the pair is below the 14-day and 28-day moving averages while the RSI has dropped to the oversold low of 23.43. It is also trading along the lower line of the Bollinger Bands. The pair will likely continue moving lower to test the 107.00 support level.
SPX500
The S&P 500 index rose to an intraday high of $2960, which was the highest level on record. On the four-hour chart below, the pair has made an impressive recovery after falling to a low of $2728 in May last month. This price is above all the short and medium-term moving averages. The RSI remains above the overbought level of 70. After the Fed boost, the movement of the index will depend on the outcome of the meeting between Trump and Xi next week.
