Forex Analysis 6 June 2024

CURRENCIES:

Strong ISM Services Data:

The latest ISM Services report surpassed market expectations, highlighting robust US business activity.

Key Takeaways:

• Higher business activity and growth in new orders.
• Slower supplier deliveries.
• Ongoing contraction in employment.
• Challenges with backfilling positions and managing labor costs.
• Inflation and high interest rates remain obstacles to business improvement.

US Dollar Reaction:

• Following the strong ISM data, the US dollar showed a slight recovery but remains under pressure ahead of Friday’s NFP (Non-Farm Payrolls) release.

Recent US Dollar Movement:

The US dollar index has declined after reaching a two-week high last Thursday.

Influences include:

• Better-than-expected US inflation data.
• Weak Chicago PMI and disappointing JOLTs and ADP jobs reports.
• The dollar index has fallen below all three simple moving averages, facing near-term resistance from the 200-day SMA and the 38.2% Fibonacci retracement of the recent uptrend.

Upcoming Events:

• Friday’s NFP Report: A critical release; further weakness in the US job market could pressure the dollar lower.
• ECB Policy Decision: President Christine Lagarde is expected to announce a 25 basis point interest rate cut. Any hint of another cut in July could weaken the Euro, potentially lifting the US dollar index, given the Euro’s significant weight in the index (approximately 58%).

STOCK MARKET:

Nvidia’s Record High:

• Nvidia shares soared over 5% to a record high of $1,224.40, propelling the company’s market cap above $3 trillion for the first time.
• This milestone places Nvidia as the second-most-valuable company in the US, surpassing Apple, with Microsoft in the lead.

Tech Sector Rally:

• Wednesday’s rally in Nvidia was part of a broader upswing in tech stocks, fueled by softer US economic data and declining Treasury yields, which sparked hopes for a Federal Reserve rate cut in July.

AI Leadership and Product Announcements:

• Nvidia’s pivotal role in AI has driven its stock up over 140% this year and more than 200% over the last year, with a remarkable five-year gain of over 3,300%.
• CEO Jensen Huang announced plans for high-powered versions of the Blackwell chip and a new AI chip platform, Rubin, expected to debut between 2025 and 2027.

Financial Performance:

• Q1 adjusted earnings per share: $6.12.
• Q1 revenue: $26 billion, up 262% year-over-year.
• Data Center revenue: $22.6 billion (86% of total revenue, up 427% year-over-year).
• Gaming segment revenue: $2.6 billion.

Stock Split and Dividend Increase:

• Nvidia announced a 10-for-1 stock split effective June 7 and a dividend increase from $0.04 to $0.10 per share.

Competition and Customer Dynamics:

• Competitors AMD and Intel are ramping up their AI chip offerings, potentially challenging Nvidia’s market dominance.
• Major customers such as Amazon, Google, and Microsoft are seeking to reduce their dependence on Nvidia’s chips to lower capital expenditures.

CRYPTOCURRENCIES:

• Bitcoin: Steady at $70,987.
• Ether: Increased by 1.71% to $3,764.

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