Traders have been nervous and worried about the Chinese economy not picking up strength, and the recent data continued to play the drum that economic growth is slowing down. When China began to dismantle its COVID-related policies, there was enormous optimism among traders and investors that we were going to see massive economic activity in China. But of course, with global growth in major jeopardy, Chinese growth failed to meet many expectations.
But unlike other central banks, especially the Fed and the BOE, where the public is completely fretting about their monetary policy, or the ECB, which is increasing interest rates when the GDP numbers are showing that the region is in a recession, the PBOC has adopted a very unique approach. The Chinese central bank doesn’t want the growth cycle to slow down at any cost, and it has been paying very close attention to the economic data.
Today’s announcement of cutting two key lending rates is another step in the right direction to boost growth, and we think that it will lift economic growth in China. In terms of market reaction, there is already a lot of optimism among traders who have celebrated the news, and they believe further recovery and strength in the economic numbers will follow.
US Stock Market
Over in the US, in a short holiday week, the US futures are once again moving to the downside. Traders seem to be more in the mood to book some profit, as the stock market did record another week of strong gains last week. The US indexes, the S&P 500 and NASDAQ Composite, posted their best weekly performance going back to March.
Overall, the focus in the US is on the Fed’s monetary policy. Jerome Powell, the Fed Chairman, announced last week that the time has come to sit back and watch the impact of their hard work on the economic data. But the fact that the Fed still wants to increase interest rates two more times this year is keeping many traders nervous, as they believe that it will have a more adverse influence on the US stock market as the economy is very much teetering on the recession borderline.
If the Fed actually increases interest rates two more times this year, we are highly likely to see a sell-off in the US stock market in the later part of this year. So far, many traders and investors are considering the comments from the Fed officials nothing more than just jawboning. Unless, of course, the US, by some miracle, avoids a recession in the second half of the year and the Fed increases interest rates due to the sticky nature of inflation, then we may not have that much of a detrimental impact on the US stock market.
Gold
The precious metal continues to consolidate, and the price action has become more lifeless as traders are focused on the economic data. Remember, the Chairman of the Fed said last week that their future monetary policy is closely tied to US economic data? The Fed chairman is speaking in his testimony tomorrow, and that is going to be the key event for traders where they may get to hear something new that will influence the dollar index and the gold price.
In terms of support, the 1950s price handle seems to be decent for now, and we do some buy orders there that are keeping the price where it is now. However, if the selling pressure resumes, the support of 1950 may not hold, and traders will be really looking at the next important support level, which is at 1,900.
Oil Prices
Crude oil prices continue to flirt with the $70 handle, a level that doesn’t sit quite well with the OPEC cartel. But the cartel also knows its limit, and it knows that it cannot continue to intervene, after all, a supply cut of one million barrels was announced not too long ago. Traders are hoping that Chinese economic activity will go full throttle, especially after the recent lending rate cut announcement.
The bottom line is that most traders are mainly focused on the Chinese government’s policies, and this is their last resort while the UK, the EU, and the US continue to disappoint in terms of producing stellar economic numbers. Without robust oil demand, oil prices are unlikely to find enough momentum to move higher or stay where they are currently.
Bitcoin
The race is on once again, and now it is Fidelity, which is very much in the news with its Bitcoin ETF filing news. It is important to note that this is not new news that these institutions are looking to open businesses, which will help Bitcoin. But what is quite important currently is the timing of this news and the firm commitment from these big Wall Street giants.
The fact that Black Rock is still fully committed to getting involved in the Bitcoin space and is not afraid of the SEC’s recent reaction has given strong confidence to the investors who believe in this space. Additionally, traders are aware that BlackRock (NYSE:BLK) has a strong track record of resolving issues with the SEC and that all other major banks, including Goldman Sachs (NYSE:GS), which has been waiting a long time to enter this market, will use the product it will offer.
Overall, we continue to remain highly bullish in this space, and we think that a rally is about to take place for the bitcoin price. This might be the last opportunity for many investors who have been waiting to make their money in this space.