U.S. Dollar And Tech Stocks On The Backfoot Following Tuesday's Selloff

Over the past 24 hours, and especially during this morning’s Asian Session, investors have been focused on the NASDAQ and the US Dollar. The US Dollar unexpectedly saw its strongest decline in almost ten days. The US Dollar Index has dropped below 111.00 for the first time in 3 weeks.

Crude Oil continues to move within the price range confirmed in yesterday’s market analysis. The price on Tuesday saw a strong decline to $82.79 during the first half of the day. Though, the price saw an even stronger correction after the Dollar significantly declined. However, the price remains below $85 per barrel.

UK investors focused on the appointment of the new Prime Minister, Rishi Sunak. The country still faces a serious economic crisis, with the economy lacking investor confidence, mortgage rates hitting 7%, and a cost of living crisis. The new Prime Minister is faced with the difficult task of convincing investors that the UK government will not fall into a major account deficit. At the same time, citizens are protesting his leadership as they believe he isn't capable of alleviating their troubles. Citizens are currently calling for “price freezes”.

So far, the Pound has slightly improved since Mr. Sunak’s leadership has been confirmed, and the FTSE 100 has stabilized. Investors are clearly happy to see that the Bank of England and the UK government are again cooperating, which wasn't the case under Truss’s government. Investors will pay attention to the new budget and the Bank of England’s Rate decision next week.

The NASDAQ started the day strong on Tuesday, increasing by 2.38% to almost a monthly high. However, as discussed yesterday, the price will largely depend on the earning reports for the US’s largest technology companies.

The earnings did indeed disappoint after showing clear strain from lower economic growth. The index declined by 1.88% after the release of the third quarter’s earning reports.

Alphabet (NASDAQ:GOOGL), who owns Google and YouTube, declined by 6.58% after market close and Microsoft (NASDAQ:MSFT) stocks declined by 6.65%.

Both companies saw sales increase, but at a much slower pace than previous quarters. Alphabet’s sales rose by 6%, the lowest in almost ten years. Microsoft’s sales rose by 11%, which is better but still the lowest in more than five years.

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Earnings per Share for Alphabet missed expectations by 15%, which was mainly due to YouTube shrinking for the first time since it started reporting publicly.

Both companies commented on the current economic environment and expressed their concerns for 2023. Analysts have also advised that US companies are struggling with the stronger US Dollar, which makes prices significantly higher for foreign investors.

h2 EUR/USD - Technical View/h2

The EUR/USD increased by 0.91% yesterday and has also continued the trend, climbing a further 0.25% during this morning’s Asian session.

When looking at technical analysis, we can see a clear “higher high and higher low” condition in the price since the 21st of the month. This morning's price has also broken onto a higher impulse wave, and Moving Averages indicate a bullish trend.

The price is primarily driven by the US dollar decline after a streak of poor economic figures. This week, the US has confirmed much lower than expected PMI reports and a poor CB Consumer Confidence figure released yesterday. In addition to this, most economists, including the CEO of Goldman Sachs, have advised over the past 24 hours that a US recession is likely.

Lastly, investors are readying their positions for the expected interest rate hike due to take place tomorrow by the European Central Bank. The ECB is expected to increase interest rates by 0.75%, taking the refinancing rate into the “neutral zone.” The interest rate is still far lower than the Federal Reserve’s, but investors are pricing this into the exchange rate.

Written By: NAGA