US Enters Technical Recession
Markets received news yesterday that the US has unofficially entered recession following adv Q2 GDP contracting, marking a second quarterly decline. Following Q1's 1.6% decline, Q2 was seen contracting 0.9% at first glance. Despite the implications, the new has been met with a seemingly counter-intuitive rally in US stock markets.
However, the reason behind the rally is fairly simple in that traders are now quickly repricing their US rate-hike projections over the remainder of the year. With bullish positioning in USD having built up to elevated levels recently, the shift in sentiment is causing a sharp unwinding in the Dollar, helping lift sentiment in equities. Whether this initial strength proves to be short-lived is another question entirely.
For now, however, markets are simply reacting to this shifting narrative. Surely as recession fears grow more prominent over the coming quarter the impact on markets might shift, but for now, equities look vulnerable to further upside if USD continues to fall. With this in mind, today’s core PCE data will be closely watched. If we see any unexpected moderation, this should strengthen the view that the Fed will slow the pace of hiking from next month, leading USD further lower and allowing equities room to run higher.
Technical Views
Dow Jones
The reversal off the 30000 level in the Dow has seen the market breaking above the recent 32072.32 level highs. With both MACD and RSI bullish here, the focus is on a continuation higher near-term towards the 33575.05 level next and channel top. This will be a key area for the market with bulls needing a break above this region to confirm a shift in momentum.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.