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Risk Friday: Fear is a Terrible Thing to Waste

Behavioral sentiment in the broad markets took a turn for the worse yesterday among many major equity indices. This as financial institutions seemingly came to the short-term conclusion the Federal Reserve may actually have to raise interest rates again on the 26th of July, and possibly beyond. Meaning, the Fed might actually back up what it has been saying.

Yes, investors have been warned many times already by some analysts that the handwriting was on the wall regarding additional increases to the Federal Funds Rate, but it seems a fear of losing out has kept many market participants actively running forward with blinders on not cognizant of the Fed's rhetoric.

Day traders should always be mindful of their emotions. While it is not good to trade based on emotions when involved in an active position, intuition and gut instinct sometimes can save you money when you decide to simply sit on the sidelines and watch the market action instead of participating. In other words, if you are nervous and your instinct is bothering you - do not attempt to enter the trade.

U.S Data Remains Rather Strong even as Inflation Boils

Yesterday's better than expected jobs report via ADP helped create sparks early regarding U.S economic data continuing to show it is robust, but the ISM Services PMI threw gasoline onto the fire with a much better result of 53.9 compared to the estimated reading of only 51.3. While inflation simmers in the U.S, signs of limited growth abound too making stagflation a real danger.

Investors can now attain a yield around 4.995% on 2-year U.S government Treasuries. A gain of nearly 5% that is almost assured with very little costs regarding commission rates needing to be spent, looks like a solid short-term investment to many. Equity markets have a reason to feel spooked. If the U.S Fed raises the Federal Funds Rate which is now 5.25% to 5.50% at the end of July, and at the same time continues to speak in an aggressive manner about other potential hikes later this year, summer may lose its sense of tranquility for financial institutions.

Price of gold dropped on the 6th of July after solid U.S economic data.
Gold Five Day Chart as of 7th July 2023

Gold which was trading at nearly 1925.00 USD yesterday, suddenly fell to around the 1900.00 briefly in the wake of the better U.S economic data, showing investors are worried the USD has some additional strength to display potentially. Again, the results of intraday gyrations may not mean a lot to mid and long-term investors, but day traders speculating on the outcome of quick hitting results frequently get hurt by the bursts of volatile storms.

U.S Official Jobs Numbers Today and Anticipation

Adding another dose of intrigue to the day are the upcoming official jobs numbers from the U.S, including the Non-Farm Employment Change and the Average Hourly Earnings reports. The inflation data via the earnings statistics are anticipated to show a gain of 0.3%, if for some reason it comes in stronger than expected this could create more fireworks. Having said that, the Wall Street Journal reported yesterday that Americans appear to have stopped quitting their jobs in order to switch to similar competitive positions as much as they had been the past couple of years. Perhaps this signals wages are starting to cool or least will in the near-term.

Let's also remember that yesterday's selloff in equities may have been anticipating better Non-Farm Employment Change results today based on the ADP outcome Thursday, and other solid U.S data before like last week's GDP gains. Day traders betting on quick hitting CFDs via their brokerage platforms should be careful today and listen to news regarding the U.S bonds market. Inexperienced speculators should try to understand the adage - buy the rumor and sell the fact. Meaning 'smart money' often acts before others and takes advantage of their outlooks regarding data.

Quick Warning on Binance and Cryptocurrencies for Gamblers

Value of BNB/USD has dropped significantly the past three months and recent Binance news is creating poor value.
BNB/USD Three Month Chart as of 7th July 2023

In a non-related subject, cryptocurrency traders seem to remain rather steady but should be nervous - if anyone is actually really trying to speculate in this endeavor besides Larry Fink of BlackRock currently, news regarding Binance remains troubling on the surface as legal clouds grow. Folks involved with the BNB coin should be careful. As one of the most 'important' crypto exchanges Binance's legal problems moving forward could affect the prices of cryptocurrencies significantly. As of this writing BNB/USD is at nearly 233.00, and it should be noted Tether's USDT appears to remain rather solid for the moment at 1.00. A look at the current three month chart of BNB/USD highlights its latest value struggles.


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