US stock market may gain momentum from the Fed

Global stocks reached their highest level in over a year, while U.S. Treasury yields and the dollar remained steady ahead of important U.S. inflation reports and interest rate decisions from the Federal Reserve and other central banks.

U.S. stocks closed higher, driven by gains in the Technology, Consumer Services, and Industrials sectors. The dollar showed little movement as investors favored riskier assets, anticipating that the Fed would not raise rates for the first time since January 2022.

However, oil prices fell about 4%, reaching their lowest level since December 2021 due to concerns about weak demand and increasing global supplies, compounded by uncertainties about interest rates and inflation. Traders remained cautious, considering central bank decisions and worries about weak Chinese demand and rising Russian supply.

The S&P 500 and Nasdaq surged to their highest closing levels since April 2022. The S&P 500, which had risen 20% since its low on October 12, signaled the start of a new bull market according to some market participants.

Recent gains in mega-cap stocks, positive quarterly earnings reports, and optimism regarding the Fed potentially nearing the end of its tightening cycle have contributed to the rise in indexes. The rally has expanded to include more economically sensitive sectors like energy and industrials, as well as small-cap stocks, demonstrating the resilience of the U.S. economy despite higher interest rates.

The equity index's gains were fueled in part by expectations of a slowdown in Fed tightening and lower consumer and producer price indices compared to the previous month. Small-cap stocks in the United States have struggled recently, lagging the S&P 500, but their values have become extremely favorable when compared to larger competitors.

Traders are indicating a more than 70% probability that the central bank will maintain rates within the 5%-5.25% range on Wednesday, while there is a 71% chance of a rate hike in July, according to the CME Fedwatch tool.

The focus is on upcoming inflation data and the Federal Reserve's interest rate decision. The Federal Reserve is starting its two-day meeting, coinciding with the release of the consumer price index (CPI) for May. The CPI is expected to indicate a slight decrease in inflation, with core prices remaining stable. While the inflation data may not change the Fed's decision, it could lead them to adopt a less hawkish stance if it aligns with expectations and reflects reduced price pressures. Market participants are expecting a decrease to 4.1% in annualized inflation compared to the previous month's reading of 4.9%.

Data for Technical Analysis (5H) CFD US30 DJIA

Resistance : 33388.6, 33426.5, 33487.7

Support : 33266.2, 33228.3, 33167.1                                     

5H Outlook

Source: Investing.com      

Buy/Long 1 If the support at the price range 33216.2 - 33266.2 is touched, but the support at 33266.2 cannot be broken, the TP may be set around 33400.0 and the SL around 33196.0, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 33388.6 - 33438.6, TP may be set around 33500.0 and SL around 33236.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 33388.6 - 33438.6 is touched, but the resistance at 33388.6 cannot be broken, the TP may be set around 33260.0 and the SL around 33458.0, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 33216.2 - 33266.2, TP may be set around 33145.0 and SL around 33418.0, or up to the risk appetite.       

Pivot Points Jun 13, 2023 02:42AM GMT

Sources: Investing 1, Investing 2