The Fed's Beige Book, which was published yesterday, indicated that the United States' recovery pace has accelerated in the last two months.
This has led to price pressures, as companies have to deal with a shortage of workers in addition to the increase in producer prices and supply costs that the global economy has experienced in recent months.
These things have caused the CPI for April to accelerate to the highest levels in the last 12 years.
Therefore, the uncertainty regarding a change in the Fed's economic policy continues to be present in the market. Fed members such as Patrick Harker made statements saying that the central bank should begin discussing the time frame to start downsizing the asset purchase program.
In this scenario, the U.S. Treasury Bond Yields remain at high levels (1.60% for the 10-year benchmark). The U.S. Dollar strengthens slightly after the publication of the report and the statements of the members of the Federal Reserve.
The ADP Non-Farm Employment change report is scheduled for today in the U.S. The markets expect 650k new jobs to be created, somewhat lower than last month's data. Also, the Unemployment Claims and ISM Services PMI reports will see the light of day, the first with a forecast of 390k, and the second with a rise to 63, a level of expansion that would confirm the excellent growth rate of the North American economy to which the Fed alluded in its Beige Book.
In this context of optimism and growth, raw materials remain at the high levels reached recently. In the case of Oil, the commodity has overcome resistance levels around $67 and reached levels not seen since 2018 paving the way to new highs located in the area of $ 74, from a technical analysis point of view.
But oil is still at overbought levels as we can see in the RSI, with possibilities of bearish divergences if it experiences any downward correction. In the last OPEC meeting, no clear decision was made, but the possibility of increasing production would mean an important change for the black gold.
In the currency market, the Australian dollar remains high, but it shows signs of exhaustion of the trend. The future evolution of the raw materials market will directly impact this currency so closely correlated with commodities.
AUD/USD evolves in what could be a potential H.S. that would have its neckline in the 0.7570 area and with an RSI showing signs of exhaustion but without divergences at the moment. Everything will depend on the behavior of the commodity market and/or the strength of the U.S. Dollar.
Sources: Bloomberg, reuters.com.
The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.
As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).
The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest.
The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.
JME Financial Services (Pty) Ltd trading as ZA.CAPEX.COM acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via ZA.CAPEX.COM, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15. Magnasale Trading Ltd is the principal to the CFD purchased by investors