The markets have been having moderate volatilities this week so far as sentiment gears toward risk-off. Negative risk sentiment resumed on Tuesday to further pressurize equities and lift the dollar.
The US stock market had a significant resurgence on Monday although has dropped a bit earlier today. In the Chinese market, losses are far bigger and thus pushing the bearish effect on high-beta Aussie and Kiwi. In the FX space, the dollar index was impressive in the early hours of the London session as it glides to 92. EURUSD fell to 1.19 psychological level while GBPUSD finally breach the 1.382 support. NZDUSD was the most volatile pair across the Asian and early London sessions while USDJPY remains the laggard as it struggles to make any significant move as a rising Yen offsets a rising USDJPY.
For commodities, the WTI oil rally was struck at $62 and is now back to $61 as the downside potential remains opened below $60. Gold continues to struggle at 1740. Early in London, the yellow metal was trading between 1738 and 1740 despite a falling bond yield.
Macro-Economics and Central Banks
Light macros so far in the week until Wednesday’s Euro-zone PMIs. Most attention is centered around the central bank’s policies, comments, and testimonies. The PBoC has injected CNY 10 billion through a 7-day reverse repos at 2.2% rate while setting the USDCNY mid-point at 6.5036 vs the expected 6.5056.
Later today, the Fed chair Powell will testify before the House financial service committee together with the Treasury Secretary Janet Yellen. He’s expected to come softly as situations in recent times have improved. However, he will include that the economy is far from a complete recovery. He is expected to pledge to do whatever it takes to support the economy until the desired recovery is achieved.
Covid-19 Vaccines & Stimulus
Over 458 million doses of vaccines have been administered across 134 countries according to the Bloomberg vaccine tracker at a rate of nearly 11.3 million doses a day. Infectious-disease experts believe that 70-85% of the population needs to be vaccinated and thus vaccine firms are on the run to meet demands.
Meanwhile, the US NIH has stated that it’s concerned that the information released from the AstraZeneca trial may have included some outdated info and doubtful data efficacy.
The German Chancellor has said that the Covid infections are increasing as a result of the British variant. She added that the country is in a very pressing situation and is racing to hike its vaccination rate. Also, she announced stricter Easter lockdown restrictions. Meanwhile, in the UK, the Health Minister has proposed banning travels from the EU countries as cases in the country rises despite heavy vaccination.
Reports have surfaced that the US President Biden’s economic advisers will present him a fresh $3 trillion to spend for the next stage of his economic plan. However, it was not included whether some of the funds will go out as stimulus.
China is back at the central stage of geopolitics. Recently, Washington expressed worries and might have to take action over the human rights abuse in China especially toward the minority tribes in Xinjiang. The White House thus expected tough and direct talks with China.
Also, China has responded to the travel ban imposed on it by the US, UK and EU stating that the steps and measures were based on lies. The China foreign ministry has summoned its EU ambassador to lodge a protest against the ban.
Market Forecast and Key Levels
DXY: Major resistance at 92.2. A break above should see further rallies toward 92.5 resistance. However, a return to the downside would be triggered by a breach of the 91.7 support. Further decline toward 91.3 and 91 could follow if the dollar returns to the bearish path.
EURUSD: 1.187 support and 1.19 psychological level should be watched. The bulls will be encouraged by a bounce off the zone followed by a break above the 1.195 resistance. Further rally to the 1.2 psychological level and above should then follow. However, to the downside, a breach of the 1.187-1.19 support zone should push for more decline toward 1.18 psychological level.
GBPUSD: The Cable breached below the 1.38 psychological level. Further decline to 1.37 is very much likely.
XAUUSD (Gold): The yellow metal continues to struggle around the 1740 key level. 1740-1745 is expected to resist further rallies. A dip to 1730 should therefore trigger a massive fall toward 1725, 1720 and on a larger scale 1700 especially if the bond yield returns to the start fresh resurgence.
US (WTI) Oil: The back gold resurgence was resisted at $62 and has followed with a significant retreat to $60. Further decline to prices below $60 is very much likely in the short term.
S&P 500 (US 500): The US equities indices are pushing back on Tuesday after Monday’s resurgence. Unless S&P returns above 3955 resistance, further decline below the 3900 key level toward 3850 is very much likely in the short term. To the upside, 4000 is still very much eyed.
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