20.10.202109:02 Forex Analysis & Reviews: US market is ready to hit year's highs on October 20

S&P500

The US market is rising to hit year's highs

The major US indices showed strong gains on Tuesday: the Dow rose by 0.6%, the NASDAQ added 0.75%, the S&P500 increased by 0.7%. The market opened with a gap upward and closed at the highs, which indicates strong investor's optimism.

In general, Asian markets supported the US market growth on Wednesday morning. Japanese indices went up 0.3%, Chinese indices added 0.1%.

China's authorities are fighting over a plan to impose a new tax on real estate. The new tax should make real estate speculation unprofitable and prevent speculative price increases.

Energy. Oil is showing some signs of weakness while rising and is down -0.5% from resistance to $85 (Brent). However, oil is still strong and aims for further growth.

Europe's gas crisis. ICE gas futures remain above $1,000, they closed at $1,100 yesterday.

COVID-19 is spreading globally. Its usual growth on weekdays is 412,000 cases around the world. So, COVID-19 stopped declining. There were 72,000 cases in the US, 44,000 cases in the UK and 33,000 cases in Russia yesterday. The coronavirus pandemic is at all-time highs in Russia. The officials may introduce non-working days from October 30 to November 7 as regional medical burden exceeds limits.

The S&P500 4519 ranges from 4490 to 4550. There is about 1% left of the year's highs concerning major US market index. The high was hit on September 2, then the market started a correction. The market showed the signal to end the correction on October 14. Besides, it has been in an upward trend since then. Yesterday, new US residential construction data was released. It was much weaker than economists expected and the figures were lower than in August. In September the annual rate of new residential construction in the United States was 1,58 million. However, this may be a seasonal decline due to the end of the summer construction season. Earlier this week, industrial production data was released with a marked decline in September, a signal of a slowing US economy. The Fed's Beige Book report concerning the US economy will be released late tonight, as usual exactly 2 weeks before the Fed's new monetary policy decision.

US oil inventories rose above forecasts by 3.2 million barrels a week, compared to expectations of 2 million barrels. US oil inventories halted their decline after the end of the summer driving season.

Apple has been forced to limit production of its iPhones due to further global shortage of chips. There was the same reason for car companies to limit their production. This fact has contributed to rising car prices and overall global inflation.

Several major US companies, such as General Electric, are introducing vaccination requirements for their employees. It is not possible to reduce a high rate of COVID-19 cases in the United States without these measures. Moreover, this hurts the economy.

Biden and Democrats in the US Congress yesterday made notable concessions to Republicans on their social spending and infrastructure package to get it passed as a whole. Democrats, for example, are willing to reject introducing 2 years of free college tuition at the expense of the budget.

The USDX 93.70 range is 93.40-94.00. The dollar remains under pressure, though it stopped declining. The dollar is gaining support as the Fed's key meeting, which is due on November 3, approaches.

USD/CAD 1.2343, it is trading in the range of 1.2300-1.2370. The pair is ready to continue falling. However, a corrective upward rebound is possible, especially if oil manages to correct stronger before climbing $85 Brent.

Conclusion. The US market will try to pass the year's highs in the coming days by the S&P500 index and continue growing. However, it should be noted that the potential for this growth is unlikely. Both price levels are very high, and the US economy has passed the period of its maximum growth. Besides, the Fed will have to react to rising inflation.