The US Dollar is on the rise against some currencies again, the Japanese Yen continues to collapse despite the intervention by BoJ and the US stock market reaching an 11-month low.
The US stock market is now at its lowest point in 2022. Some analysts have advised that it may be a good time to buy the dip for individuals looking for a longer-term investment. However, according to Bloomberg, most analysts believe the stock market is still likely to decline further.
The first week of October will also hold various major events related mainly to the US Jobs Market, OPEC, and another possible Japanese intervention.
USD/JPY - Technical View
The USD/JPY continues to see high levels of volatility, with the price temporarily breaking out of the previous price range. The Japanese government intervened in the currency market to reduce the price to 140.500.
However, almost all economists agreed that the move would be unsuccessful, as it has proven to be in the past. So far, the economists were right as the price increased above 145.000 once again.
The economic performance of the Japanese Economy remains positive. Retail sales increased by 4.1%, exceeding the forecasted increase of 2.8%. Preliminary data indicated that industrial output rose by 2.7%, instead of 0.2%, which is much lower, and that unemployment dropped to a 2.5% April low.
However, the issue remains that the Central Bank is extremely dovish, expecting inflation in the country to decline naturally without the need to increase interest rates. This has resulted in a currency crisis as the US Dollar significantly increased in value against the market, yet the Bank of Japan (BoJ) refuses to act.
Currency traders are considering a potential further intervention by the Japanese Federal Government, especially as the price approaches 146.000 again. This afternoon, investors will turn their attention to the ISM Manufacturing PMI, which is predicted to remain at the same level as the previous month.
S&P 500 - Technical View
During this morning’s futures market, the S&P 500 slightly declined but returned to the week’s open price. The index is currently 25% lower than its latest price high on the 2nd of January 2022.
The key question traders are now asking is whether the downward trend is close to an end. And to be honest, there is no simple answer. One of the main factors affecting the stock market is inflation. So, has inflation peaked? If it has and shows signs of decline, the stock market will likely perform better.
Another factor to keep in mind is the upcoming earnings season which is predicted to be flat. However, this cannot be confirmed until the figures are officially released. Earnings reports can potentially create high levels of volatility. Lastly, investors will keep in mind investor confidence levels and risk appetite within the market. Both are currently low and would need improving to see a more bullish stock market.
Stock market crashes are known to cause a decline anywhere between 27% to 38%, and the current decline measures below that. Of course, past performance cannot be a clear indicator for future price movements, but this is something investors can take into consideration. Stock market traders will be mainly interested in seeing September’s inflation figure, which will be released in 10 days.
Crude Oil
Oil prices saw a bullish price gap measuring 2.13% this morning. This means that the price opened higher. The bullish price movement may be related to OPEC's expected decision to cut oil production.
Analysts expect OPEC to announce a 1 million barrel cut in production after the recent oil price declines. According to OPEC, the level of demand is expected to decline due to the global recession, and it requires action by OPEC to ensure that the price does not collapse as it has in the past.
A production cut can significantly increase the price of crude oil, but this will also depend on the level of demand. If demand is significantly decreasing, then it can pressure prices further. OPEC is scheduled to meet for an all-day meeting this Wednesday. It should be noted that the price of the US Dollar may also influence the price of oil.