North American News
US stocks turn in another impressive performance as the ‘hated’ rally gets legs
- Nasdaq leads the way again
US equities were flat coming into New York trade but put up another strong day as Treasury yields sank after the ECB. Stocks finished the day at the best levels, led by the Nasdaq. It’s the third day of impressive gains and the chart is looking better and better.
- S&P 500 up 40 points, or 1.0%, to 4003
- Nasdaq +1.4%
- DJIA +0.5%
- Russell 2000 -0.1%
US natural gas jumps to a five-week high after tight inventory data
- Storage season isn’t going well
This week’s EIA storage report showed a build of just 32 bcf, much less than the 47 bcf expected and last week’s build of 58 bcf.
In turn, US natural gas at Henry Hub is up over $8. This breaks the 61.8% retracement of the Freeport fall.
Commodities
Gold could be on the verge of a significant correction, Fed meeting will be decisive
- Gold price falls back into the hands of the bulls following the ECB events.
- XAUUSD is now at a critical juncture in the bearish cycle where a significant correction could play out.
- The Federal Reserve meeting will be an important event for rate and gold traders.
Gold price is higher by 1% in midday New York trade and has recovered from the fresh lows of $1,680.93 after sliding from $1,718.39 to Thursday’s highs. The yellow metal was pressured even as the US dollar weakened early on Thursday, with the ICE dollar index last seen down below the 107 figure but in the middle of the day’s range of 106.415 and 107.323. The day has been turbulent due to the European Central Bank that raised interest rates for the first time in more than a decade as it seeks to tame inflation.
ECB lifts the lid on rates, gold price rallies
The ECB took the well-telegraphed plunge and raised rates. Seeking to tame inflation, the ECB had for weeks flagged a 25 basis point hike, until earlier this week, when sources told Reuters the central bank was weighing a bigger move. This came to fruition on Thursday when the central bank hiked by 50bps and also announced a bond protection plan, called the Transmission Protection Instrument (TPI), that is designed to cap the borrowing costs across the region in an effort to help heavily indebted countries like Italy, whose coalition government fell after the resignation of Prime Minister Mario Draghi. The outcome for XAUUSD was bullish despite the two-way trip in the euro and US dollar. Gold rallied from the day’s lows and the bulls committed to the upside, buying the dip throughout the hours ensuing the ECB event.
Read more: Eurozone rate hike: A big step for the ECB, but a small help for the euro
US bond yields fall in wake of ECB hasty normalization
Bullish for the gold price, US bond yields fell with the benchmark 10-year note below 3% after the first interest rate hike in 11 years by the ECB as concerns about runaway inflation trumped worries about growth. The two-year US Treasury yield was down to a low of 3.121% while the yield on 10-year Treasury notes fell to 2.917% which is back into the middle of the range for July as investors get set for the Federal Reserve interest rate decision on July 27 in which it is largely expected to hike rates by 75 basis points.
Silver Price Analysis: XAG/USD rebounds from $18.20 area, some positive signs emerge
- Silver erased losses and rose back above $18.70.
- The rebound could gain momentum if it breaks $19.00.
- The primary trend remains bearish; break under $18.00, to open doors to $17.50.
Silver bottomed on Thursday at $18.23, slightly above the YTD low of $18.13. It then rebounded sharply back above $18.50, boosted by a rally in gold prices following a sharp decline in US yields.
XAGUSD rose above the $18.75 area, a relevant short-term support. It peaked at $18.81 hitting a fresh daily high. If the rebound holds, the odds of a more sustainable recovery will rise. The next critical resistance stands around $19.00.
If silver firmly breaks the $19.00 zone, it could point to a double bottom near $18.20 and recover a strong support. The following relevant barrier is seen at the $19.50 area that contains the 20-day Simple Moving Average (intermediate resistance at $19.15).
The daily chart also offers some positive signs for the metal, with MACD making the first bullish cross in two months. Stochastic Oscillators are coming out from oversold levels.
A decline back under $18.50 should add pressure to the $18.20 low, softening the mentioned bullish signs. The break under $18.20 would expose $18.00. The break below could trigger volatility and a potential acceleration toward $17.45.
EU News
European equity close: Italy lags as parliament dissolved
- No strong theme today
Markets are trying to come to grips with the surprise ECB 50 bps, the Transmission Protection Instrument, flows resuming in Nord Stream 1 and Italy dissolving parliament.
That’s a lot to take in and it led to a choppy day of trading
- Stoxx 600 +0.3%
- German DAX -0.6%
- French CAC flat
- Spain IEX -0.3%
- Italy MIB -1.0%
Other News
Nord Stream 1 turbine stuck in Germany as Russia plays games
- Russia so far hasn’t given the go-ahead to transport it back
Two people cited by Reuters said the turbine was flown back from Canada on July 17 but has been stuck in Germany since, waiting on Russian permits.
The sources said it could take further days or even weeks.
Russia reopened the pipeline today but it’s operating at 40% capacity, which will leave Europe under-supplied for gas this winter.
Russia says the turbine has a direct impact on the safety of the pipeline and that documentation from Siemens was still missing.
At this point, it’s clear that Russia wants to slow roll this and keep Europe in a precarious spot as long as it deems necessary to achieve its goals in Ukraine.
Cryptocurrency News
Bitcoin Price Update: Tesla’s impact on Bitcoin market value
- Tesla sells 75% of its BTC holdings for an average price of $29,000.
- Bitcoin price has not yet shown a correlation to the sudden bearish news.
- Invalidation of the bullish macro thesis remains at $13,880.