Headlines

*US to release oil reserves as President Biden tackles high pump prices

*Canadian inflation remains elevated keeping pressure on the BoC

*UK inflation close to peak after it hits a 40-year high, GBP tumbles

*Dollar gains with Treasury yields, gold falls to three-week low

FX: USD bounced off recent range lows and also above the 21-day SMA at 112.45. The US 10-year Treasury yield broke higher from recent bullish consolidation to levels last seen in July 2008 at 4.13%.  

GBP dropped on numerous broader concerns amid economic, political and fiscal woes. EUR/GBP moved up above 0.87 and just below resistance at 0.8721. EUR failed at resistance at 0.9863 and is currently trading on its 21-day SMA at 0.9767.  USD/JPY hit more fresh highs at 149.89, as new 32-year top. The yen has fallen more than 20% this year.  

NZD/USD and AUD/USD remain weak having failed to push higher this week, in what looks like bearish consolidation. Gold hit three-week lows on the robust dollar and firmer bond yields.

Stocks: US equities closed lower after two solid days of gains, with the S&P 500 losing 0.7%. The tech-heavy Nasdaq 100 gave up 0.4% while the Dow ceded 0.3%. The Vix, Wall Street’s fear gauge, has moved lower over the past week but still remains above 30. Weaker than expected company news and more hawkish Fed comments are not helping bulls.

Event Takeaway – Stock earnings mixed

Tesla shares fell nearly 3% after hours as the EV giant reported weaker than expected sales. Production and delivery bottlenecks impacted earnings along with dollar strength. Higher costs linked to a ramp up in output at new factories being slower than hoped also hurt the stock. The shares are down nearly 45% from their highs amid higher inflation and rates causing a slowdown in the economy.

Shares in Netflix jumped 13% after it published positive results after Tuesday’s opening bell. The streaming giant stemmed its subscriber losses in the third quarter. It is also seeing strong demand for its advertising capacity. This came after the company stunned investors in April by revealing subscriber growth had gone into reverse. The S&P 500 remains in positive territory this week, but the global slowdown is forcing falling growth estimates.

Chart of the Day – Gold sinks near to recent lows

As Treasury yields break higher so the allure of gold lessens. Rising interest rates increase the opportunity cost of holding the non-yielding asset. It is being pressured by the prospects of aggressive rate hikes by the Fed with prices dropping over 1% to a three-week low.

It looks like another test of the recent low at $1614 is near. The halfway point of the 2018 low and August 2020 high at $1614 reinforces this area. The next support level looks like $1560. Prices need to get above $1676/87 to break out of the bearish channel.