Risk Appetite Is Back as FED’s Clock Is Ticking

The US dollar remained to stay under pressure inspite of cementing expectations of one step cut of the interest rate for upcoming FED’s meeting in September. Gold had hit the new all-time-high, while Bitcoin had rebounded back to almost $60000 area.

Inflation in the US was unchanged in August, producing the 0.2% growth. That, in practice, should give some support for the US dollar, though other currencies start to depreciate, following the spreading “dovish monetary policy narrative”.

European Central bank had decreased the interest rate from 3.75% to 3.5%, one step, ahead of the Fed. That led to the stabilization of the US dollar index, even though yields of 30-year bonds have slipped below 4% this week.

Now markets are getting closer to the first interest rate decline for the US, and as the US dollar might be closer to eventually finding a dip, as most other currencies may follow the declining trend.

Currently, the most notable trend in the marketplace is improving risk appetite among investment and speculative vehicles, such as stocks, cryptocurrencies, and Gold. The latter, as mentioned above, had hit another all-time high, stock indices display notable recovery too.

Other than major stocks, small caps also display the same dynamics, possibly indicating pivot in expectations about the future of the market.

In today’s review, we will focus on the most underrated sector of the US stock market: energy sector.

Exxon Mobil (XOM)

The spread between technological and energy sector had reached the overvalued territory – the upper border of the Bollinger Bands indicator (parameter of 20 daily candlesticks). Usually, that’s a potential signal for starting a rotation between techs and energy stocks.

This spread may go down due to either a bearish pullback for techs or a bullish pullback for energies. The latter seems as a more realistic model given the improving market sentiment.

Exxon mobil stock (XOM) is consolidating within a massive chart formation, close to it’s bottom, and may bounce back, returning to the trading range, as displayed on the chart.

The declining energy markets, particularly Crude oil, pressure energy stock prices down, but usually the improving market sentiment can lift energy stock prices too.