The dollar index was tamed beneath 92 as the US bond yield resumed the downwards correction. Gold jumped back to the 1740-1750 region to absorb the retreat that started late last week. US stock indices reached fresh record highs. Highlights today include speeches from ECB President Largade and some members of the FOMC including Chairman Powell. Also, crude oil inventories will be eyed.
Market Wrap ahead of London
The dollar plunged across the board on Monday following a lower bond yield despite a higher than expected CPI data. The dollar index was squeezed between 92.5 and 92 and needed a clear breakout of either of the technical extremes to determine the next near-term direction. Eventually, the index broke downside below 92 and the dip was sustained ahead of today’s London session. The Euro benefitted the most with EURUSD rising as high as 1.196 a few hours before London. USDJPY plunged below the 109 psychological level as fallen yield lifted the Yen. S&P 500 and NASDAQ 100 bagged fresh record highs while WTI recovered to $61 per barrel. Overall, general market sentiment favors risk appetite as investors seem to absorb fears concerning inflation, at least for now.
RBNZ maintained policy – NZD jumped
The Reserve Bank of New Zealand kept its official cash rate unchanged at 0.25%. However, it has ignored cutting down its current level of quantitative easing settings. Despite the optimism of a fast global economic recovery from the pandemic, most banks prioritize meeting their inflation and employment targets. Since the RBNZ, the NZD has gained over 0.4% over a basket of other major currencies. NZDUSD bounced off 0.7 and now at 0.71 after breaking out of a week-long range.
Major market themes – 14th April
The Eurozone industrial production and german 30-year bond auction come early in the London session before ECB President Lagarde’s speech. US crude oil inventories will come later before Fed Chair Powell speaks at the economic club of Washington. Later, FOMC members Williams, Clarida and Bostic will be speaking at different events. Fed Chair and FOMC members might have to answer questions on inflation. Generally, the economic calendar is light today.
US and UK are expected to withdraw their troops from Afghanistan. US President Biden is expected to announce this decision. The US troop evacuation is scheduled for September 11. Also, Lord Forst – British PM Boris European Advisor, is to meet the EU commission VP probably to discuss the NI Protocol.
Despite the optimism in recent months, the world is not relenting on covid vaccination. So far, over 805 million doses of vaccines have been administered to at least 448 million people representing 5.76% of the global population. In the US, over 120 million people have received at least a dose each while Israel has vaccinated over half of its population.
Meanwhile, the US Covid coordinator said the country has enough doses to maintain the current pace of vaccination. Pfizer boasts delivery of 10% more doses by end of May. However, vaccinations have been delayed in Europe as Johnson and Johnson takes proactive measures to give updates on guidance for investigators and participants.
Market forecast and key levels
The dollar index DXY will most likely drop to 91.5 at least before the New York session. 91.3 support and 91 psychological levels are likely targets if FOMC members continue to sound dovish. To the upside, 92 is the nearest resistance level. The bulls will have to break 92 significantly for any near-term chance of recovery. EURUSD bulls will eye 1.2 while GBPUSD might find resistance at the 1.38 psychological level. USDJPY is bound to go lower to at least to 108.5. High beta AUDUSD and NZDUSD are off to 0.77 and 0.71 respectively while USDCAD might find support at 1.25. However, a return above 1.26 is very likely for the Loonie if the oil price flattens again.
Gold might stay sideways between 1740 and 1750 for a while before the next break. Break above 1750 should see the commodity retesting the 1760-1765 resistance zone. A breakdown below 1740 should aim at 1730 at least.
Silver is close to breaching the 25.62 top. An eventual break will see it off to $26. The next resistance level is at $26.64.
Oil is currently flowing with the risk-on sentiment. However, the commodity might find it difficult to sustain any rally above $61 (WTI). A further decline below $60 is very much likely as the commodity dumps back into the three weeks range.
Cryptocurrencies have resumed their bullish trends with XRP, Doge, BNB and Cardano taking the largest share of the recent rally. Bitcoin hit a fresh all-time high with over 5% gain in the last 24 hours and 11% in the past 7 days. The global crypto market cap has hit a whopping $2.27 trillion. The rally is expected to continue with BTC eyeing $66-70 in the short-term while Ripple is expected to surpass the $2 mark on its way to reclaim its previous all-time high after lagging for so long. Ethereum and Litecoin should hit $2,500 and $300 respectively.
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