Weekly Financial Market Summary (Week of June 24-28, 2024)

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This week has been dynamic in the financial market with significant variations in stock markets, influenced by specific sectors and economic expectations. Major currencies have reacted to monetary policy and geopolitical events, highlighting the importance of staying alert to economic and political developments.

Stock Markets: This week, the stock market experienced mixed movements. The S&P 500 reached a record high, driven primarily by the tech sector and enthusiasm around artificial intelligence (AI). However, as the week progressed, the index pulled back due to weaker-than-expected economic data, particularly in employment and building permits.

Tech Sector: Tech stocks, led by companies like Nvidia, initially pushed the market upwards but later faced a correction. This sector has been the main driver of the S&P 500’s growth this year, with a year-to-date gain of 26%.

Trends in Other Sectors: While the tech sector showed weakness towards the end of the week, other sectors such as real estate, communication services, and consumer discretionary performed better. This suggests a diversification in market leadership.

Inflation and Monetary Policy: Inflation remains a central issue. Recent data suggests a moderation in prices, which could lead the Federal Reserve to consider rate cuts later this year. However, persistent inflation in services could complicate this decision.

Analysis of the Three Most Important Currencies

US Dollar (USD): The dollar has remained strong due to expectations that the Fed will keep interest rates high to combat inflation. The possibility of rate cuts has been moderated by inflation data that has not cooled as quickly as expected. Geopolitical events and a divergence in monetary policies between the US and other economies have also favored the dollar as a safe-haven asset.

Euro (EUR): The euro has shown weakness against the dollar, affected by political instability in the Eurozone, especially with the elections in France. The laxer monetary policy of the European Central Bank compared to the Fed has contributed to this weakness. The divergence in monetary policies and political uncertainty could continue to pressure the euro.

Technically, EUR/USD trades within Wednesday’s range, with investors staying on the sidelines awaiting US core PCE inflation data. The descending edge of the symmetrical triangle pattern on a daily time frame remains a significant barrier for euro bulls. A new drop would occur if the pair broke the mentioned chart pattern.

Japanese Yen (JPY): The yen has been under pressure due to the ultra-accommodative monetary policy of the Bank of Japan, which contrasts with the Fed’s more restrictive stance. Tokyo inflation data will be key to assessing possible changes in the Bank of Japan’s policy, although they are expected to maintain a flexible stance to support the economy.

Momentum favors buyers, with the RSI in overbought conditions. However, due to the strength of the uptrend, most technicians use 80 as “extremely” overextended conditions.

That said, the first resistance for USD/JPY would be the psychological levels of 161.00, 162.00, and so on, before testing the November 1986 high of 164.87, followed by the April 1986 high of 178.