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19.08.202109:45 Forex Analysis & Reviews: US indices extend losses amid Fed minutes

Exchange Rates 19.08.2021 analysis

S&P 500

US indices fell on Wednesday after the release of the minutes of the Fed's July meeting. The Dow Jones Industrial Average dropped by 1.1%, S&P 500 slid by 1.1%, and the Nasdaq Composite lost 0.9%.

The US dollar index advanced to 93.40, its annual high.

Yesterday, the US stock market edged down both due to the Fed's announcement of an upcoming policy change and a long-overdue correction following a strong rally without pullbacks.

Asian markets also declined in the early trade, albeit moderately: Japan's market lost 1.1%, China's one fell by 0.2%.

Commodity market. Oil prices weakened as well. On Thursday morning, Brent slipped by 3 dollars to 67.20 dollars per barrel. The oil market ignored statistics showing that US inventories had declined by 3.2 million barrels last week.

Global statistics on COVID. Yesterday, the world posted an increase of 695 K coronavirus cases. The US recorded +158 K cases and +1,000 deaths. Britain and France posted +34 K and +28 K respectively, but +100 deaths each.

S&P 500: 4,400. Trading range: 4,360-4,420.

"Looking ahead, most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year," the Fed's minutes stated, adding that the economy had reached its goal on inflation and was "close to being satisfied" with the progress of job growth. However, committee members broadly agreed that employment has not met the "substantial further progress" benchmark the Fed has set before it would consider raising rates.

Thus, already at the next meeting on September 21 and 22, the Fed is likely to decide on cutting purchases of government bonds and mortgage bonds (now purchases amount to $120 billion a month).

As for the S&P 500 index, the first target for its correction is 4,350. There is no point in buying before the price reaches this level. However, the correction may continue. In the event of a strong upward rebound, for example, today, speculators will probably try to sell near the recent highs.

USDX: 93.40. Trading range: 93.0-93.80. The US dollar index has reached its annual high. Thus, the way to the top is open. From a technical point of view, the dollar is likely to go up towards the levels of 95 and 96, especially amid expectations of the Fed's policy tightening.

USD/CAD. Yesterday's data showed that Canada's annual inflation rate had accelerated to 3.7% in July, beating analyst expectations and exceeding the Bank of Canada's target.

Conclusion. In the late session, the markets will receive a new report on employment in the US. New claims for unemployment benefits are projected to increase by 370 K. Thus, a correction in the US market is highly likely.

*A análise de mercado aqui postada destina-se a aumentar o seu conhecimento, mas não dar instruções para fazer uma negociação.

Jozef Kovach,
Analytical expert of InstaSpot
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