Trading Insights: US manufacturing falls; weaker commodities

Market Commentary

The US 100 Index gained 33% during the last 52 weeks. At the same time commodities prices, in general, have been trending lower.

Yesterday's US ISM data suggests that the US manufacturing sector is in a downturn, although a weaker manufacturing sector is a sign of a slowing economy, US stock indices have been enjoying a very strong year of gains. One reason for this is that a slowing economy can help the US Fed in its fight against high inflation.

Since stock markets tend to lead the real economy, it appears that stock market investors have been discounting the prospects of an economic slowdown and betting on a return to prosperity.

The above chart illustrates the 52 week performance of the US 100 index.

The above chart illustrates the trend in US manufacturing.

Yesterday’s US ISM missed the forecast, falling to 46 vs the forecasted increase to 48.

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Upcoming economic events

• Wednesday July 5th: US FOMC meeting minutes
• Thursday July 6th: US JOLTs
• Friday July 7th: US Nonfarm payrolls (NFP)

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Today’s economic calendar

Aussie tumbles across the boards after no rate hike

Reserve Bank of Australia (RBA) interest rate decision; holds the rate at 4.1%.

• Current rate 4.1%
• 0.25% rate increase did not happen; many analysts had been forecasting that the RBA would hike the rate to 4.35%
• RBA stated that the current rate is working and that a more balanced supply and demand will continue.

Source: TradingView / J. Knobel July 4 2023 6:12 UTC

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Trading insights & strategy

Prospects for higher Germany 40 Index still on the table

Germany 40 Index current price consolidating the March low - June high uptrend advance

• Current price €16,080.
• Upside prospects for a further extension towards the €16,715 can not be ruled out provided price can hold above the €15,840s.
• Downside risk below the €15,840s could put the 13 lows near €15,480 in sight.