The stock market trades at a 3-week high after significant support from the latest earning reports and US employment data.
Economists continue to expect a rate cut no earlier than September 2024 despite the US unemployment rate rising to 3.9%.
The US Dollar Index trades higher on Tuesday and fully corrects the decline from NFP Friday.
Dow Jones investors wait for Disney to release their latest quarterly earnings data. The stock holds a weight of 1.93%.
USDJPY – The US Dollar Regains Lost Ground
The USDJPY is an interesting pair on Tuesday as the US Dollar is the best performing currency within the market while the Yen is witnessing the strongest decline. Investors will continue to monitor as we enter the European Cash Open to ensure no significant changes. The exchange rate has been declining since the 29th of April when the Japanese Government is believed to have intervened and strengthened the Yen. However, the US Dollar has been gaining over the past 24 hours. During this morning’s Asian Session, the exchange rate trades 0.44% higher.
Currently the only concern for the US Dollar is the latest employment data which illustrates a potential slowing employment sector. However, investors are quick to point out that this cannot be known simply from 1 weak month. This is the first time the NFP data read lower since November 2023. No major data is in the calendar for the next two days which can influence the US Dollar. Despite the weaker employment data and lower wage growth, investors continue to predict a rate cut no earlier than September 2024. This is something which can also be seen on the CME FedWatch Tool, which shows a 34.3% chance of rates remaining unchanged in September.
In regard to the Japanese Yen, most analysts expect the next rate increase in the second half of this year depending on a stable movement of inflation. In addition, investors are monitoring the actions of financial authorities, expecting new currency interventions from them against a weakening Yen. This is the main concern for investors speculating against the Yen. However, economists continue to advise the Yen will struggle to gain even with a small rate hike, unless the rest of the financial world starts cutting rates.
USA30 – Investors Turn To Disney Earnings Data!
The Dow Jones is close to trading at a 1-month high and is also trading slightly higher this morning. The index recently has been supported by the latest employment data which indicates a higher possibility of rate cuts by the Fed. Today investors focus on the quarterly earnings report for Disney.
Disney stocks are trading 0.37% higher during this morning’s pre-trading hours indicating investors believe the report will be positive. So far this year the stock is trading 28.40% higher and is one of the better performing stocks. Yesterday, the stock rose by 2.47% but remains significantly lower than its all-time high of $197. Currently analysts believe the earnings data will either be similar to the previous quarter or slightly lower. If earnings and revenue read higher, the stock is likely to continue rising. The stock is the 22nd most influential stock for the Dow Jones and will only influence the USA30 and USA500, not the USA100.
Currently, technical analysis continues to indicate a strong price sentiment. The price trades above the 75-bar EMA and above the VWAP. In addition to this, the RSI is trading at 68.11 which also signals buyers are controlling the market. The only concern for traders is retracements. A weaker retracement could decline to $38,703, whereas a stronger retracement can fall back to $38,571.
Michalis Efthymiou
Market Analyst
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