The U.S. CPI data in October was lower than expected, and there were rising calls for U.S. inflation to peak. Long-suffering investors sold the U.S. dollar aggressively and flooded back into risky assets. The non-U.S. started a retaliatory rebound.
October US CPI data sets the tone for a short-term market rebound
The U.S. CPI data, which was not seasonally adjusted in October, showed that the annual rate of CPI was recorded at 7.7%, expected to be 8%, and the previous value of 8.2%, which strengthened investors’ confidence in the peaking of U.S. inflation. The wording, the market expects the Fed to raise interest rates by up to 50 basis points in December, and also feels that the inflection point of the Fed’s monetary policy is approaching, and market optimism is revived.
Just one data turn has made the market so excited, showing that investors have been suffering from the Fed and the dollar for a long time. The Fed’s aggressive interest rate hikes have seriously eroded market liquidity and market confidence, and the strong dollar has depressed all dollar-denominated assets. Large funds and ordinary investors with growth-type investments suffered heavy losses. Now that the inflection point has become clear, the dollar bulls finally have a reason to start to lighten their positions, while the funds to cover their positions and buy are enthusiastic, prompting a retaliatory rebound of non-US varieties. This sentiment is likely to continue into Christmas.
In 2022, the global stock market will continue to be hit, and investors are secretly complaining. As far as the current situation is concerned, the chain reaction caused by the Fed rate hike and the Russia-Ukraine conflict will continue. Entering 2023, when recession expectations are the theme, will there be an inflection point in the Fed’s monetary policy, will market sentiment improve, and how will U.S. stocks perform? What is our coping strategy? Lock in Dailyfx’s weekly live stream!
The dollar establishes a staged top, and US stocks start a staged rebound
Affected by changes in data and sentiment, the U.S. dollar and U.S. stocks fluctuated wildly, affecting the entire financial market.
In terms of the US dollar, the top pattern with 110.00 as the neckline has been formally established, and the short-term downward trend is obvious. The price is expected to move closer to the 105.00 line. In the process, it is advisable to maintain the idea of shorting on rallies until the US dollar index returns to above 110.00. Correspondingly, actively do more non-US currencies.
The rebound of US stocks is worth watching and will lead the global stock market and risk sentiment. Among the three major stock indexes, the Dow Jones is the strongest and the Nasdaq is the weakest. The decline in CPI and the slowdown in interest rate hikes stimulate the overall U.S. stock market. In the short term, the three major stock indexes will rise together until new catalysts emerge. The performance of U.S. stocks continued to boost global stock markets, and the rebound from lows should be cherished. When U.S. stocks show signs of rising in the future, be wary of the possibility of another reversal.
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