The U.S. non-farm payrolls data in June was positive. The market believes that the Fed has the confidence to continue raising interest rates by 75 basis points in July. The just-released June CPI data undoubtedly strengthens this expectation. The dollar is expected to continue to refresh highs, and the euro and gold face falling below the mark the risk of the gateway.
The Importance of June CPI Data
The Fed will hold an interest rate decision in the last week of July. The Fed decides the rate of interest rate hikes based on the inflation situation and employment status. Obviously, the June non-agricultural data released last week supports the Fed to continue raising interest rates. The Fed itself is also eager to suppress prices. It will also raise interest rates by 75 basis points.
It is controversial whether the Fed will slow down interest rate hikes after September, because Europe and developing countries are facing a severe energy crisis, and inflation and the epidemic are impacting the global economic outlook. Slow rate hikes or even turn to rate cuts.
June’s CPI largely determines whether expectations for a slowdown in rate hikes will come to fruition.
However, data showed that the U.S. CPI rose to 9.1% in June without a seasonal adjustment, setting a new high since 1981. The market may increase its expectations for the Fed to raise interest rates. As for recession, it may be temporarily ignored.
How to win in chaos
At present, the main contradiction in the market is still risk aversion and the US dollar. If you grasp this point, you will grasp the general direction and follow the trend.
At this stage, the Fed’s strong interest rate hike expectations have overshadowed the hawks of other central banks, the European Central Bank’s stubbornness under the prospect of economic recession, and the euro’s parity has proved the market’s view. In the future, other central banks may overwhelm the Fed, and the market will reverse, but not now, don’t think too much, just keep an eye on the Fed.
The economic outlook, energy crisis, inflation situation in Europe and most underdeveloped countries has unnerved investors, and the emergence of new mutant strains has increased risk aversion, as evidenced by the performance of the stock market. The market continued to sell off assets, including gold, and the dollar became the ultimate safe-haven tool.
The market has a certain demand for rebound after the continuous decline, but the state has not changed substantially, so every adjustment of the dollar is still a buying opportunity, and we should seize the general trend and give up the small trend.
The euro may fall below the 1.0000 mark, gold is challenged at $1,700
After the data was released, the U.S. dollar jumped back above 108.00, the euro fell directly back to near parity, and gold dropped to 1710. From the perspective of the situation, a strong U.S. dollar may accelerate the decline of major varieties below the mark.
The weakness of EUR/USD remains unchanged. Even if it falls to parity, it has not slowed down. It is not suitable to consider bottom-hunting. You should continue to choose to hold short positions. The upper resistance has moved down to 1.0050-1.1100. The idea of shorting on rallies remains unchanged.
The trend of gold is also inclined to the downside. After falling below 1780-1750, there is a tendency to accelerate the downward trend. The key support below is 1680-1700 from last year to the present. It is advisable to pay attention to the development of the trend. If the price of gold falls below 1680, it will open up more downside, and the market outlook may drop to 1600-1500;
It is expected that the US dollar will continue to rise, and it is not the United States to be cautious about bottom-hunting.
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