Three days have passed since the announcement of the results of the Fed meeting. During this time the US dollar has risen sharply against all currencies. The main idea is that the Fed will have to raise rates as early as 2023. The big question is how long this upward trend will last.
If one thinks that the growth of the dollar means weakness in other currencies, especially in emerging markets, this is not the case. The US dollar has primarily risen against raw materials and precious metals. In other words, it has started to collapse in their prices.
Is the bubble collapsing in comodities or is this just the correction that everyone has been waiting for? Indeed, speculators have really jacked up their prices in recent months. After all, the real value has not been formed by supply and demand for a long time now. Yes, these factors certainly affect the market, but with a large time lag. But the market is very quickly influenced by the positions of the big players in futures contracts. It is the futures that move the price.
So the natural desire to lock in big profits + a huge number of leveraged positions, led to a sharp fall in the price of the commodity. Which dragged down currencies and then stock markets, including the US.
However, if you look at the Euro/Dollar pair, you can see that so far nothing terrible has happened. The price is approximately in the middle of the annual corridor. And only a break-down of the level of 1.16 might set a new long-term trend. This level is still 2.5 figures away. In case it penetrates that level, it might turn out to be a bear trap.
The main thing is that thanks to the Fed, the volatility that our traders have been waiting for is back on the market.
11.00 EU Business Climate Index for June
16.30 Federal Reserve Bank of Dallas Industrial Activity Index for June
Important Notes on This Publication:
The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.