STOCKS, CRUDE OIL, AND GOLD PRICES TUMBLE AS RECESSION RISKS RISE

American stocks tumbled sharply on Tuesday as investors continued worrying about a recession. The Dow Jones crashed by over 600 points while the Nasdaq 100 and S&P 500 indices fell by over 1%. Investors are worried about the elevated risks that the American economy is staring at a recession as the Fed ramps up its hiking cycle. The bank has already increased interest rates by 150 basis points and analysts expect that it will hike more in the current quarter. Historically, stocks tend to underperform in a tightening cycle.

The price of crude oil tumbled sharply in the American session as concerns about a recession remained. Brent, the international benchmark, dropped to $100 while Western Texas Intermediate fell below $100 for the first time in two months. The drop happens a few days before Joe Biden is set to travel to Saudi Arabia for talks with the crown prince. Oil prices will be part of his agenda considering that US gas prices have surged to a record high. OPEC and its allies decided to increase their daily quotas in last week’s meeting. At the same time, oil workers in Norway went on strike over a pay dispute.

The US dollar continued its strength as investors waited for the upcoming FOMC minutes. The report will provide more clarity about the state of the deliberations that happened in the previous meeting. Investors will want to see whether some officials disagreed on the bank’s extremely hawkish position. The other key catalyst for the currency will be the JOLTs job openings data. Economists expect these numbers to reveal that the number of job openings dropped from 11.4 million to 11 million. ISM will also publish the latest non-manufacturing PMI data.

XBRUSD

The XBRUSD dropped sharply during the overnight session. It moved below the important support at 100 for the first time since April. Before falling, the pair formed a small head and shoulders pattern. It also moved below the 25-day and 50-day moving averages. Also, it declined below last month’s low of 104.56. Therefore, while the trend is bearish, there is a possibility that it will have a dead cat bounce as investors buy the dip.

EURUSD

The EURUSD pair crashed to the lowest level in 20 years as worries about the UK economy remained. It dropped to a low of 1.0246, which was lower than the important support at 1.0358. It has moved along the lower side of the Bollinger Bands while the Average Directional Index (ADX) has pointed upwards. The pair will likely continue falling as demand for the euro wanes.

XAUUSD

The XAUUSD pair crashed hard as commodity prices dropped. It fell to a low of 1,766, which was the lowest level since December last year. Gold is at the lower side of the Bollinger Bands and below the 25-day moving average. The Relative Strength Index (RSI) has moved to the oversold level while the Stochastic Oscillator is pointing upwards. Therefore, the pair will likely continue falling today.