Mid-Week Market Overview and Forecast - BoC, ECB and US Inflation Eyed

TigerWit Africa

The US treasury yield is downbeat in the second week of June as the price pushed below 1.55% and now close to touching 1.5%. Wallstreet indices remain firm while the dollar’s minor bounce couldn’t be sustained. The market awaits the BoC later today to inject some momentum.

The equities market is rolling out profits again as Wallstreet aims for fresh record highs once the current resistance key areas are broken. S&P 500 rally was resisted at a near 1-month high at 4238 before a sharp decline. However, the index is back challenging tough areas and might gyrate between the 4234 and 4220 price levels before the next surge would attempt another record top. In Canada, TXY reached a fresh record high while in Europe, the French stock market (CAC 40) also hit a fresh record high whereas its UK equivalent struggles but remains firm.

Meanwhile, the US Treasury Yield is eyeing May low (1.48%) as Fed continues to discard inflation concerns. Further decline to 1.45% or lower is very much likely this week. The effect means pressure on the dollar after Friday’s NFP miss. The dollar index however continues to struggle around the 90 psychological level. A minor recovery to 90.2-90.25 might happen before the bearish run continues below 89.5 in the medium-term.

Forex market: BoC to further aid the CAD?

In the FX space, the Sterling is back upside again after Tuesday’s fast decline as a result of the delay of the wider reopening of business activities in the UK which was suppose to start on June 21st. GBPUSD bull will attempt another breach of the 1.42 psychological level after recent failures. Meanwhile, EURUSD has not been able to match 1.22 since it touched it on Monday but has rather stayed range-bound expecting a breakout. Traders have eyes on Thursday’s ECB monetary policy statements.

Meanwhile, today, the Bank of Canada will steal the headlines with its monetary policy statements. The BoC’s hawkish tone in their last meeting has supported a strong CAD. After the disappointing job data on Friday, the bank is expected to be less hawkish today. Traders and investors will want to know if the Bank will return to its status prior to the last meeting by adding to its bond purchases or will step down on its late 2022 rate hike forecast. With the Canadian stocks outperforming despite the current restrictions as a result of Covid, the bank might want to maintain the current status and postpone a major adjustment till the next meeting. CAD remains upbeat at around $1.209 after pushing the dollar back from $1.213.

Commodities – WTI advances to $70 per barrel as Gold struggles 

The commodities have stayed a bit quiet this week by their own standards. Gold retested 1900 earlier in the week before diving close to the 1880 key support. However, there has been a little lift as lack of momentum squeezed the yellow metal between 1886 and 1896. The bullish trend remains intact and a break above 1900 should eventually happen especially as the treasury yield plunge.

Meanwhile, oil prices have regained dominance after last week’s OPEC meeting. WTI surged nearly 3% on Tuesday to hit $70 for the first time since October 2018. Brent trades at $72 after over 320% gain since the recovery from the pandemic started in April 2020.  With the upbeat market mood, oil prices might add some dollars before the end of the month.

Cryptos – Bitcoin plummets further 

Bitcoin is having the third consecutive losing month as the President added to the corporate blows. The premier crypto is close to retesting $30,000. The current market rebound from $31,000 seems weak and the bears will most likely push further toward $25,000. This looks like the repetition of the 2018 bearish phase in the early stage. However, Ethereum builds a shield again as the current dip is not as strong on the second largest crypto. However, a retest of the $1400 key support is very much likely in the coming weeks. Ripple was ripped below the $1 mark while Doge $0.3 support to content with off the $0.15-0.2 target support areas.

Looking ahead in the second half of the week

The Bank of Canada monetary statement will take the central stage during the New York session on Wednesday before the crude oil inventories and the 10-year bond auction in the US.

Thursday will be big for the Euro as investors would want to know if the ECB would consider rising inflation as enough reason to tighten its policy amid the current opening of the economies in the zone. Later in the day, Fed policymakers and investors will have the opportunity to see the most recent inflation status of the US even as the former seems not to bother while the latter remain cautious. The 30-year US bond auction will follow later in the day.

On Friday, the BoE Governor Bailey will speak amid delay in the full reopening of the economy and rising concerns on post-Brexit NI protocol. Also, the G7 meeting with be watched closely as traders and investors follow up with the group’s decision to push for a corporate tax hike.

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