Key Events This Week: Another Hawkish Surprise?

Monday, June 21

  • Fed speak: St. Louis Fed President James Bullard, Dallas Fed President Robert Kaplan, New York Fed President John Williams
  • ECB President Christine Lagarde speech

Tuesday, June 22

  • Fed Chair Jerome Powell testimony before US House subcommittee
  • Fed speak: San Francisco Fed President Mary Daly, Cleveland Fed President Loretta Mester
  • Eurozone consumer confidence

Wednesday, June 23

  • Fed speak: Fed Governor Michelle Bowman, Atlanta Fed President Raphael Bostic, Boston Fed President Eric Rosengren
  • Markit PMIs: US, UK, Eurozone

Thursday, June 24

  • BOE rate decision
  • Germany IFO business climate
  • US weekly jobless claims
  • Fed speak: Philadelphia Fed President Patrick Harker, Atlanta Fed President Raphael Bostic, St. Louis Fed President James Bullard, New York Fed President John Williams

Friday, June 25

  • Fed speak: Cleveland Fed President Loretta Mester, Boston Fed President Eric Rosengren
  • US personal income and spending, PCE inflation, consumer sentiment

The Fed’s switch in tact has send the buck soaring, as dollar bulls rejoice at the thought of a better-than-expected US economic recovery prompting the Fed into sooner-than-expected action.

However, from a technical perspective, the USD index is having a breather at the time of writing. This index is trying to pull back from overbought conditions, having broken above the upper bound of its Bollinger band while its 14-day relative strength index attempts to retrace back to the sub-70 region.

Note that this USD index is an equally weighted index comprising six major currency pairs, as opposed to the benchmark DXY which has different weightings for its 6 constituents (Euro being the largest at 57.6%, and the Swiss Franc accounting for just 3.6% of the DXY).

Still, should Fed officials tow a hawkish line over the coming days, in light of what had transpired at last week’s FOMC meeting, that could spell further gains for this USD index, potentially seeing it match its year-to-date high.

‘Markets Extra’ podcast: Fed discos to taper-town

BOE to follow Fed’s cues?

This change in approach by the Fed could prompt the Bank of England to follow suit, framing the BOE’s policy commentary in a new light. Note that UK inflation climbed above the central bank’s target for the first time in two years, with the CPI coming in at 2.1% year-on-year in May. This could hasten the BOE’s attempts to rein in surging consumer prices.

Overall, markets remain optimistic about the UK economic reopening considering its elevated vaccination rates. Still, the spread of the Delta variant remains as a source of concern, having pushed back the full reopening of the UK economy which was initially due to happen today.

It remains to be seen how the BOE will interpret such risks, and how it will impact Sterling.

GBPUSD has tumbled under the weight of the soaring greenback in recent sessions, having broken below its 100-day simple moving average (SMA), though finding support for the time being around the 1.38 mark which proved reliable in March as well as end-May. Stronger support may arrive at the 1.3670 region.

To be clear, the BOE is widely expected to leave its policy settings untouched this month, just as the Fed did. However, it’s the signaling of its future policy intentions that could rock markets once more.

Should the hawkish voices at the Bank of England also grow louder, emulating their peers from across the pond, that could allow GBPUSD to find a firmer footing above its 100-day SMA.

Written by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Fed’s Hawkish Suprise

Growth is seen higher at 7% (yes SEVEN!) in 2021, half a percent up from the prior forecast, 3.3% next year and 2.4% in 2023. Unemployment was left broadly unchanged and core PCE inflation is forecast to rise sharply this year at 3% (+0.8% higher than the previous estimate) before slowing to 2.1% in the following two years. Chair Powell admitted higher inflation could go on for longer though he doesn’t expect it to feed into expectations.

Big dot plot change

The majority of the FOMC brought forward en masse their rate hike outlook and this proved the biggest sucker punch to markets who have been guided over the past eighteen months by nonstop easing and a persistently dovish Fed who has remained purposefully behind the curve. Two hikes are now suggested in 2023 (from zero in the prior meeting) and seven out of 18 members already expect one next year. This all means that tapering, let along the beginning of taper talk, is not so far away!

Dollar bid

This is all quite a shock from the FOMC even if markets had set itself up for one, with traders expecting the Fed to remain fairly cautious while acknowledging rising price pressures. Going forward, the Fed is now more likely to respond to data and is more prepared to tighten than previously thought.

The dollar has burst higher and there is plenty of room for US real rates to continue rising from their low base which means more upside.

This should also mean higher volatility which is good news for traders! EUR/USD especially, has broken out of its recent range and smashed down through the 1.21 support. Although the pair paused last night at the 200-day SMA, this morning has seen follow-through selling as we dip towards the next Fib level at 1.1950.

Gold also got hit as swarms of buyers dashed for the dollar and shorts were desperate to cover positions. After the 200-day SMA got taken out overnight, $1800 is the next support level ahead of the 100-day SMA just below here.

By Lukman Otunuga Research Analyst


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Main Events of the Week!

Transitory versus sustained?

Headline and core prices are expected to jump to 4.7% and 3.5% respectively in the US CPI numbers with base effects being the primary reason for the surge higher. This should be the peak for US prices with the trend starting to come down in June, although some economists still believe they will remain elevated and above target through the rest of the year. But the Fed is in no rush to respond as it is happy to look through the spike in rising prices, especially as the latest US job figures provide a further excuse for its patient stance.

We’ve seen bond markets move already with yields falling steadily all week with the widely-watched US 10-year Treasury now trading below 1.5%, the first time since March. A bumper headline number to the topside of estimates is surely needed to arrest this fall, but bond markets are known to generally lead markets so it will be fascinating to see who is right later today.

USD/JPY has been tracking sideways this week in a narrow range around 109.50. A bumper CPI print would push the pair higher and challenge last week’s highs at 110.32/33 while support rests at the 50-day SMA at 109.10 near this week’s lows.

ECB meeting and taper talk

ECB officials have recently been talking down any mention of tapering bond buys in the emergency ECB programme but there are some expectations that there may be a small change in guidance. This would come in the statement with a shift from “significantly” to “moderately” higher than at the start of the year and see buying cut to €70bn/month versus the current rate of €80bn/month. If President Lagarde does not repeat this “taper on hold” message or there is a communication error, then the risks are skewed to a higher euro as market expectations are generally currently cautious.

EUR/USD has been treading water this week either side of 1.22. Any bullish talk from Lagarde will see the pair push higher towards end of May highs at 1.2266 with the January peak at 1.2349. Last Friday’s low at 1.2103 is support if the ECB gets out its very patient and vigilant card.

By Lukman Otunuga Research Analyst


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Stocks Continue Higher Amid Rising Prices

Asian markets are mixed and European bourses have opened up in similar fashion. That said, global equity indices are still sitting near to record / cycle highs as the Fed’s patient message continues to mean the stimulus punchbowl are still being passed around.

We had another reminder this morning about rising price pressures with China’s producer prices increasing at their fastest pace in 13 years. Soaring commodity prices as well as a low base effect after being in negative territory for most of last year has seen the index jump in recent months. This will add to global inflationary pressures and perhaps more action from the Chinese government economic planning agency who last month warned of “excessive speculation” in commodity markets and a crack down on monopolies.

Majors rangebound

Expect more quiet trade in dollar crosses today ahead of the US CPI data and ECB meeting tomorrow. Sterling is trapped in a 1.41-1.42 range with the reopening delay not unduly worrying markets that much. June 21 has been in the minds of many in the UK, but a postponement of a couple of weeks is being signalled by the government.

gbpusddaily_810

The swissie has been attracting buyers this week ahead of the ECB meeting tomorrow with USD/CHF back into its descending channel after venturing north last week above 0.9050. Bear will target the cycle low at 0.8930 unless the US inflation data prints to the topside of estimates.

Bank of Canada to stand pat

After shifting to a hawkish bias at its last meeting in April with the signalling of a rate rise in late 2022 and a second taper of its QE program, the leading hawkish central bank of the moment is set to wait for more post-lockdown data before continuing on its merry way to policy normalisation. A positive tone is expected from the Bank of Canada with an impressive vaccine rollout and strong CPI figures offset by two months of disappointing jobs data.

USD/CAD continues to consolidate above long-term support around 1.20. Any rebounds have been lacking in momentum with prices only moving above 1.22 on one occasion since mid-May. A downside break needs to develop sooner rather than later though as otherwise a deeper retracement may come into play.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Markets Awaiting Next Catalyst

Dollar direction

The dollar has a small bid this morning trading just above 90 in the DXY but within this week’s range so far with no clear move lower after the nonfarm payrolls second monthly miss in a row. It seems the jobs report was not strong enough to price in a change to Fed rhetoric which many of the dollar bulls were expecting, and not weak enough for markets to turn lower.

Some market watchers are asking if we have hit the goldilocks scenario with the economy neither too hot nor too cold, but just about right. For the greenback, the fall in yields brings little support, though yesterday’s follow-through selling has not been totally convincing.

Sterling uncertain

The UK is due to fully reopen on June 21 but there are now doubts about whether this will happen as speculation is growing that this date may be put back two weeks. Although major parts of the economy are up and running already, the psychological impact of a delayed move plus the possible uncertain date of the “new reopening” is giving GBP bulls cause for thought. The UK government is set to announce its decision next Monday, 14 June, so GBP may be choppy into this date.

Cable is stuck in its 1.41-1.42 range with the 1.42 test last week being strongly sold into. The more we trade sideways and compress within narrow bands, the stronger the resultant breakout will be when it comes. Resistance sits at the high from last Monday at around 1.4250 while a strong close below last week’s low at 1.4082 needed to encourage the sellers to come out in force.

Written by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Key Events this Week: US CPI to Inflate Expectations for Fed Tapering?

Markets appeared primarily to have latched on to the headline NFP figure of 559,000, which was below the forecasted figure of 675,000.

That jobs report alleviated some of the concerns that the Fed may have to move up its timeline for its eventual tapering of its asset purchases.

That slight respite in the ongoing inflation debate allowed the Nasdaq 100 to claim its biggest single-day gain in two weeks, while the Dollar unwound much of its pre-NFP gains.

Still, there were signs of underlying cost pressures from Friday’s jobs report.

The average hourly earnings of American workers climb by more than expected in May, while the unemployment rate also fell to 5.8% last month, compared to April’s 6.1%.

Although markets were able to ignore such inflation cues for now, focusing instead on the fact that some 7.6 million Americans remain out of work compared to pre-pandemic levels, it does not mean that the inflation debate has disappeared from market chatter.

In fact, this coming Thursday’s US consumer price index announcement could set tongues wagging once more, amidst all the other potential market-moving events lined up over the coming days:

Monday, June 7

  • Germany factory orders

Tuesday, June 8

  • Eurozone Q1 GDP (final)
  • Germany industrial production
  • Japan Q1 GDP (final), trade balance

Wednesday, June 9

  • Bank of Canada rate decision
  • EIA crude oil inventories
  • China CPI, PPI

Thursday, June 10

  • European Central Bank rate decision
  • US-Iran nuclear talks resume
  • OPEC’s monthly Oil Market Report
  • US inflation, initial jobless claims

Friday, June 11

  • G7 summit begins
  • UK industrial production
  • US consumer sentiment

Considering all the inflation markers due mid-week out of the world’s two largest economies (US and China), the ECB meeting is likely to fade into the background.

The European Central Bank is widely expected to leave its bond purchases program unchanged this month.

That sets up the euro to be more reactive to Dollar-events, with EUR/USD attempting to take advantage of the dollar’s disappointment following the NFP miss. The world’s most-traded currency pair is trying to reclaim the 1.22 mark, having recently found support at the 1.21 Fibonacci line.

Should the US May consumer price index register a lower month-on-month reading than the forecasted 0.4%, that could prompt investors into thinking that the Fed would be less inclined to adjust their support measures for financial markets. Such a narrative could lead to more weakness in the greenback, which in turn should translate into gains for the rest of the FX universe.

Written by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Marking Time Ahead of The Big One…

The slow pace of nuclear talks between the US and Iran is also helping the supply side with Brent bulls now eyeing up the April 2019 highs at $75.58.

FX major pairs are stuck within ranges, but the (even more important) monthly US labour market out tomorrow is building up to be the major risk event for the month of June, setting the scene for the next FOMC meeting mid-month. Although though the recent tone of Fed policymakers is subtly shifting, any key data misses will move the narrative once again back to an uber-patient Federal Reserve on “go-slow” with regard to policy changes and tapering bond purchases. On the flipside, Fed expectations should be gradually built into assets from here as the world heals and the recovery continues to pick up steam.

EUR/USD trading around 1.22

The world’s most popular currency pair has printed two bullish pin bar candles in recent sessions which suggest buyers are in the ascendency and stepping in when prices fall too far, too quickly. With the region’s vaccination surge gathering momentum, so the single currency should push materially higher above 1.22 so consolidating its two-month bullish trend. But for now, we know what’s on everyone’s mind, so we will be rangebound until 1.30pm BST tomorrow!

Big day for USD/CAD…tomorrow

After failing to hold gains to fresh, six-year high against the USD, the loonie is finding some support versus the dollar’s advance on the back of firm oil prices. Canadian GDP showed decent growth and even though the monthly figures highlighted the April slowdown due to the more lockdowns, the BoC remains in the hawkish central bank camp.

USD/CAD continues to consolidate across the 1.20 support zone. The longer it does so, the more explosive the breakout but gains will need to push above the 1.2150 zone to arrest the strong downtrend. The double hit of the NFP and a Canada jobs report tomorrow will no doubt determine direction.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

 

Dollar Respite From Manufacturing Data

It seems the overheating economy is not easing up just yet, though many economists expect that may happen during the second half of this year.

Equity markets were generally higher but the US closed mixed with value stocks such as financials and industrials back as the leaders while tech and healthcare fell. Asian stocks, aside from Japan touched a three-month peak before profit-taking in recently strong Chinese markets pulled it lower. Momentum has clearly ebbed from stock markets as investors worry that a stronger-than-expected rebound means sooner-than-expected monetary policy tightening.

The spotlight has been shining once again on gains in retail-investor driven “meme stocks”. AMC Entertainment rose more than 20% and is up more than 1,400% for the year while the infamous Gamestop surged over 12%. Short sellers are suffering as the Reddit crowd redirect their focus on these heavily shorted companies and move away from cryptocurrencies.

Booming commodities help European markets

Base metals are on the march again as copper closes above $10,000 for a third straight day and iron ore futures rebound. The OPEC+ meeting also passed with a lower-than-expected supply increase and the market has less concern over future Iranian supply as demand gathers pace through the summer months. Oil has pushed to recent highs with commodities in general seen as a good hedge against inflation.

Big commodity companies are enjoying this resurgence in commodity prices, with European stock market posting new record highs. The eurozone’s factory activity also helped yeseterday, rising to 63.1 in May, the highest since the survey began in June 1997.

Virus and reopening key for GBP

GBP/USD climbed to its highest level since April 2018 yesterday morning following a broadly weaker dollar tone and comments from the Bank of England’s deputy Governor acknowledging the potential for more sustained inflation and increasing optimism about the economic recovery. But dollar buying and increasing concern that the grand reopening in the UK slated for June 21 could be delayed due to the Indian Covid variant saw GBP sink back below 1.4150.

PM Johnson is due to give a press briefing later today so the threatened sterling breakout is on ice. Support rests at the bottom of the recent range around 1.41 while the bulls await a sustained push above 1.42 to continue the 15-month bullish trend.

Written by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Data in the Driving Seat

The dollar sold off yesterday and is moving lower again this morning as US equity futures are in the green, while Asian stocks are generally better bid.

Asian manufacturing figures out earlier today largely decelerated but remain above the key 50 threshold. The China Caixin PMI increased slightly to 52.0 in May, but firms continue to struggle with increasing raw material costs with the input costs index in China reaching the highest level since 2016.

Euro inflation rising

The eurozone CPI figures have just been released, with the May flash estimate registering a slightly better-than-expected 2% year-on-year growth for the first time since November 2018. Much of the increase is still driven by energy base effects, though core inflation came in at 0.9% year-on-year, right in line with market expectations. While the European Central Bank has oft repeated that it’s still premature to consider easing up its support measures, that stance may have to be massaged should consumer prices continue hitting or even exceeding the central bank’s medium-term target.

With next week’s ECB meeting looming, EURUSD has struggled to firm above 1.22 convincingly, with two attempts last week failing to hold. However, Friday’s price action was more constructive with lower prices being snapped up by buyers and printing a bullish hammer candlestick. The ISM manufacturing report out of the US is also released later, which is set to rise a bit from an already high level.

RBA opts not to rock the boat

Meanwhile overnight the RBA did very little and pointed to their July meeting as the next point where they reassess their quantitative easing (QE) and yield curve control (YCC) stimulus programmes. They did use slightly more positive labour market language by saying that progress in reducing unemployment has been faster than expected. On the flip side, they mentioned the ongoing uncertainty of further virus outbreaks though the hope here is that vaccinations will overcome this concern in time.

AUD/USD initially popped higher above 0.7760 but has since given back these gains.

Oil breaking higher

The US Memorial holiday traditionally starts the summer driving season stateside, which obviously has big implications for demand. But all eyes are on the OPEC+ meeting today with the possibility of hiking oil output again as the global recovery is widely expected to gather more pace in the coming months and stockpiles to be drawn down.

Any signs that the group hold output steady for now would likely provide more support to oil and oil-sensitive currencies like the CAD.

The year-to-date March high for Brent at $71.03 is firmly in view and then the spike high in April 2019 at $74.70, if bulls can hold prices up here and we get helpful news from the cartel.

Written by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Key Events This Week: Us Jobs Report Offers Next Marker in Inflation Debate

At the time of writing, US futures are holding steady even as US and UK markets will be closed on Monday.

What is an index and why it matters? A chat with Nasdaq

sp500mdaily_232

Wall Street’s so-called “fear gauge”, the VIX index, ended the trading week below the psychological 16 level. Another week of calm could send it to a new year-to-date low, below the 15.38 level set on 14 April.

Much could depend on how markets react to scheduled events this week:

Monday, May 31

  • US, UK markets closed
  • Japan industrial production, retail sales, consumer confidence
  • OECD economic outlook

Tuesday, June 1

  • Manufacturing PMI: China, Eurozone, UK, US
  • RBA policy decision
  • BOE Governor Andrew Bailey speech
  • Fed speak: Fed Governor Lael Brainard
  • OPEC+ meeting

Wednesday, June 2

Fed speak:

  • Philadelphia Fed President Patrick Harker
  • Chicago Fed President Charles Evans
  • Atlanta Fed President Raphael Bostic
  • Dallas Fed President Robert Kaplan

Thursday, June 3

  • Services/composite PMIs: China, Eurozone, UK, US
  • US initial jobless claims
  • Fed speak: Fed Vice Chair for Supervision Randal Quarles, Philadelphia Fed President Patrick Harker

Friday, June 4

  • Panel discussion with central bank heads: Fed Chair Jerome Powell, ECB President Christine Lagarde, PBOC Governor Yi Gang
  • Eurozone retail sales
  • US nonfarm payrolls

US jobs report key for Dollar direction (DXY)

The US nonfarm payrolls print is scheduled for the first Friday of every month. The figures due on 4 June carries greater weight, following the shockingly-low figures posted on the first Friday of May.

Markets would interpret another lower-than-expected jobs tally to mean that the Fed might be more willing to maintain its support measures until the job market is on a more solid footing. Hence, another lackluster jobs report could see the dollar index (DXY) relinquish the 90 handle once more.

However, a non-farm payrolls report that exceeds market expectations would be taken as a sign that the tightening labour market could further boost inflationary pressures.

Recall that this past Friday, the April US core PCE inflation’s 3.1% surpassed the market-expected 2.9%. That was the highest year-on-year print since 1992, albeit with the low base effects in play.

A bumper NFP this Friday could spur another selloff in US Treasuries, sending its yields surging, which in turn would offer tailwinds for the dollar.

Commodity spotlight – Oil (Brent)

OPEC+ is slated to decide on Tuesday whether to further loosen the oil taps over the coming months. At a time when markets are already bracing for more oil shipments out of Iran pending their nuclear talks with the US, more incoming global supplies would dampen oil prices further.

Over on the demand-side, watch the global PMI readings and the latest OECD economic outlook for the latest signs of a demand recovery. China’s manufacturing PMI released this morning shows that the sector is still firmly in expansionary territory in May, having posted a reading above 50 every month since February 2020.

Should markets grow confident that global demand can absorb the incoming supplies, this might help Brent oil claim a stronger hold on the $70/bbl handle.

Written on 31/05/21 06:00 GMT by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Trade Of The Week: Amazon To Announce MGM Purchase?

According to Bloomberg, Amazon could announce a deal to snap up the Metro-Goldwyn-Mayer movie studio (the one with the roaring lion as its mascot) by today. The deal could be worth nearly US$9 billion for the stable of content belonging to the film studio, which includes popular franchises such as James Bond, Robocop, and Rocky.

Media reports on this potential takeover have lifted Amazon’s stock prices, having gained in three of the past 4 sessions. Yet, looking at the longer-term trend, the stock is in need of a bigger catalyst to break out of its sideways trend and prompt its 50-day simple moving average (SMA) to have greater liftoff above its 200-day counterpart.

Amazon’s stocks have found its presence above $3500 to be fleeting. Since posting its highest-ever closing price on September 2nd, 2020, the stock is now lower by 8.11%. In contrast, the S&P 500 has gained over 17% since, while the Nasdaq 100 has added almost 10% during that same period (2 Sept 2020 – today).

Sign of the times: teenager takes over near-centenarian

For context, the purported $9 billion price tag is just about 12% of the $73.27 billion in cash and equivalents that Amazon had as of end-March. In return, its 15-year-old streaming platform gets to add another 4,000 films and 17,000 episodes of TV shows belonging to the 97-year-old film studio.

Having struggled to notch a mainstream hit, the acquisition could also grant Amazon access to the loyal followings of Mr. Bond and Mr. Balboa, not to mention also fans of Dr. Hannibal Lecter of Silence of the Lambs.

Note that Amazon’s subscription services accounted for 7% of its total revenue in Q1 2021, a share that has remained relatively stable over the past couple of years. This relatively small piece of the overall pie whoever is important to expand its subscriber tally and keep their eyeballs glued to Amazon’s platforms.

This deal also harbours the potential for revenue-generating spinoffs, promising a broader reach for Amazon’s Prime Video, a perk for Prime’s subscribers which already number at some 200 million.

Streaming wars heat up

If this deal happens, it would only underscore Amazon’s ambitions to be a major contender against streaming giants such as Netflix and Disney+. And Amazon hasn’t been afraid to spend so it can beef up.

In 2020 alone, Amazon spent $11 billion on content for its video streaming and music services. The company has also secured exclusive rights to NFL games on Thursday nights, stretching over the course of a decade beginning with the 2023 season, which would cost about one billion dollars per year. And don’t forget that Amazon has a multi-season series of “The Lord of the Rings” in the pipeline as well (think being able to impulsively buy LOTR merch while binge-watching this LOTR series).

Still, markets would be well aware that the streaming wars are far from over.

Recall that just last week, AT&T announced that it would spin off its media operations in order to combine it with Discovery and form a new media company which would be home to the likes of CNN, HBO, Cartoon Network, the Food Network, and the Animal Planet. That would create a formidable $130 billion player in the streaming wars.

According to Bloomberg data, there have been about $80 billion worth of media takeover deals announced year-to-date. That promises heightened competition for streaming platforms.

How might Amazon’s stock prices react?

It remains to be seen whether the official announcement of the deal will actually take place. Even then, it is unlikely to significantly reduce the 8% gap between current prices and the record high.

Note that even Amazon’s blowout Q1 results announced on 30 April didn’t lead to sustained gains; Amazon is down 6.4% on a month-to-date basis. To be fair, for the same month-to-date period, Disney is also down by more than 6%, while Netflix is faring relatively better having shed 2.06%.

For the longer-term, there apparently is still plenty of love for Amazon; the stock makes up more than 5% of the portfolios of over 70 hedge funds.

However, for the immediate term, it’ll likely require a lot more than just this MGM takeover for Amazon’s stocks to post a new record high.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Risk Sentiment Improves As Inflation Fears Ease

As a chorus of Fed officials reiterated that the recent pickup in inflation would be transitory, investor fears were soothed about rising prices forcing higher interest rates. US equity bulls rejoiced on this development, encouraging buying in expensive growth stocks in sectors such as technology.

While these comments have lifted risk sentiment and offered support to stock markets, concerns still linger over the Fed taking action sooner, rather than later if inflationary pressures mount. In the meantime, financial markets are likely to remain highly sensitive to inflation expectations and comments from Fed officials on this topic.

Dollar drifts lower…

The past few weeks have certainly not been kind to the dollar.

It has weakened against every single G10 currency this month and remains vulnerable to further losses amid weaker treasury yields. Although inflation worries are receding following the latest comments from Fed officials, the damage has already been inflicted on the dollar.

The main risk events for the greenback today will be the US new home sales and consumer confidence data. For April, sales of new homes are expected to hit 950,000, falling from the 1,021,000 new homes sales in March. In regard to consumer confidence, it is expected to decline slightly in May falling to 119 from 121.7 in April.

Focusing on the technical picture, the Dollar Index is under pressure on the daily charts. Sustained weakness below the psychological 90.00 level may encourage a decline towards 89.30.

Germany GDP downgraded in Q1

The euro offered a muted response this morning to the news that Germany’s economy contracted in the first quarter by more than reported in the first release. Europe’s largest economy shrank by 1.8% quarter-on-quarter in the three months to March 2021 which was weaker than the first estimate of -1.7%. On the year, the economy shrank 3.1% compared to the 3.0% preliminary estimate. Despite the downgrade, the economic outlook is starting to brighten as coronavirus cases fall and lockdown restrictions ease across the continent.

The EUR/USD is currently trading above 1.2250 and dollar weakness could send the pair towards levels not seen since early January at 1.2300.

Commodity spotlight – Gold

Gold continues to shine thanks to a weaker dollar, falling Treasury yields and extreme volatility in the cryptocurrency space.

The precious metal is trading around levels not seen in four months and is up over six per cent in May. Despite the receding US inflation fears, gold is supported by other fundamental drivers. Although the path of least resistance points north, the price action around $1870 could determine whether gold extends gains or experiences a technical pullback this week. Should $1870 prove to be reliable support, a move towards $1900 could be on the cards. However, a decline below $1870 may signal a drop towards $1855 and $1840, respectively.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Technical Outlook: G10 Currencies On Standby

Other than the flicker of action witnessed on the Norwegian Krone and New Zealand Dollar, it pretty much felt like watching paint dry on a rainy day.

After looking at the paltry intraday gains (below), we decided to identify potential technical setups in the week ahead.

As of writing,

  • NZDUSD = +0.49%
  • USDNOK = -0.43%
  • USDDKK = -0.31%
  • EURUSD = +0.30%
  • AUDUSD = +0.22%
  • USDJPY = -0.21%
  • USDCHF = -0.14%
  • USDCAD = -0.12%
  • GBPUSD = +0.10%
  • USDSEK = -0.05%

One thing that’s strikes out is the fact that all currencies in the G10 space have appreciated against the greenback today.

The not so mighty dollar remains pressured by inflation fears and is struggling to push back above the psychological 90.00 level. Sustained weakness below this point could open the doors towards 89.30.

EURUSD breakout on the horizon?

We see a classic breakout setup forming on the EURUSD.

Support can be found at 1.2170 and resistance around 1.2240. A solid breakout and daily close above 1.2240 could signal a move towards 1.2300. Alternatively, a decline below 1.2170 could pave a path towards 1.2060.

GBPUSD gearing up for a push higher?

It’s safe to say that the GBPUSD is firmly bullish on the daily charts.

There have been consistently higher highs and higher lows while the MACD trades above zero. Should 1.4100 prove to be reliable support, this could provide a platform for bulls to conquer the 1.4200 resistance level. A solid daily close above this point could pry open the doors towards 1.4240 and levels not seen since April 2018 at 1.4300.

One thing to keep in mind is the fact the Relative Strength Index (RSI) is slowly approaching overbought territory. This may instil bears with fresh inspiration if 1.4100 proves to be unreliable support.

USDNOK knocks on 8.3850’s door

If one word could be used to describe the USDNOK’s movements over the past few weeks, the best fit would be choppy.

We can see strong resistance around 8.3850 and support at 8.1700. A decisive breakout and daily close above 8.3850 could result in a move towards 8.4700.  Prices are likely to drift lower if 8.3850 proves to be reliable resistance.

USDJPY below 50-day SMA

Prices are trading below the 50-day Simple Moving Average while the MACD is in the process of crossing to the downside. Bears need to secure a solid daily close below 108.30 to encourage a decline towards 107.67. A rebound from the 108.30 level could inject bulls with enough confidence to elevate prices back towards 109.30.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Key Events This Week: Can US Stocks Halt Weekly Losing Streak?

Despite crypto’s continued wild sings through the weekend, US equity futures are attempting to gain liftoff during the Asian morning session on Monday, as stocks attempt to halt two consecutive weeks of declines:

Here are the key scheduled events that could influence market sentiment this week:

Monday, May 24

  • Fed speak: Cleveland Fed President Loretta Mester, Kansas City Fed President Esther George, Atlanta Fed President Raphael Bostic, Fed Governor Lael Brainard

Tuesday, May 25

  • Germany Q1 GDP (final print)
  • US new home sales, consumer confidence

Wednesday, May 26

  • RBNZ decision
  • Wall Street bank CEOs testify in Senate
  • Fed Vice Chair Randal Quarles speech

Thursday, May 27

  • Wall Street bank CEOs testify before House committee
  • China industrial profits
  • Germany consumer confidence
  • US initial jobless claims, Q1 GDP (second print)

Friday, May 28

  • Eurozone economic confidence, consumer confidence
  • US personal income/spending, consumer sentiment

Dollar plagued by inflation fears (DXY)

The dollar index is hanging on to the psychologically important 90 handle at the time of writing. However, the downward trend since end-March looks firmly intact, with DXY poised to test the year-to-date low.

The inflation outlook is likely to remain the dominant theme in global financial markets, as investors try and gain more clues from the scheduled Fed speak and US economic data releases due in the final trading week of May.

More signs of consumer prices making a roaring comeback, with a tolerate Fed remaining off in the sidelines, could prompt more dollar weakness in the week ahead.

Commodities to have larger say on kiwi than central bank (NZDUSD)

The Reserve Bank of New Zealand is unlikely to adjust its official cash rate mid-week, although it could provide upward revisions to its economic forecasts. While a more bullish economic outlook could help push the New Zealand dollar higher, it has to shake off its correlation with commodity prices which are still coming off their peaks.

Despite having weakened against all of its G10 peers except for the Norwegian Krone last week, NZDUSD remains within the 0.71-0.73 range that it adhered to for much of the first quarter of 2021 as well. NZD bulls will be hoping for commodity prices to stabilize in order to offer support for the kiwi, which has been relying on its 50-day simple moving average to buttress prices over the past month.

Consider also the FXTM New Zealand Dollar index, which is an equally-weighted index comprising:

  • NZDUSD
  • NZDCHF
  • EURNZD
  • GBPNZD
  • AUDNZD
  • NZDCAD

This index is on an obvious downward trajectory, and should this momentum persist, that could result in a new year-to-date low.

Commodity spotlight – Oil (Brent)

Brent oil registered its biggest weekly decline since March.

Oil bulls are hoping that the optimism surrounding the global demand recovery will be enough to offset concerns surrounding more incoming Iranian supply, should the US-Iran nuclear deal be restored.

From a technical perspective, its 50-day simple moving average (SMA) appears to be holding as a key support level once more. The week ahead could prove telling whether the 50-SMA can continue guiding Brent higher like it has in the past two months, despite the declines in the broader commodities complex.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Stocks Bounce, Dollar Fades

Growth and cyclicals led the way with Tech especially buoyant and the Nasdaq now posts small gains for the week with the index trading above its 100-day SMA. Sentiment and volatility appear to have stabilised although the VIX remains above 20 and gold is still holding its recent gains.

On the flip side, the dollar sunk back to its lowest levels since February with US bond yields are also fading back to near the lows for the week. The market now believes there will be little action from the Fed over the next few months, with the potential for more taper talk only later this year, perhaps at the Jackson Hole symposium in late August.  This means deeply negative real rates will linger and with it the dollar may struggle to retrace meaningfully in this environment.

Bouncing retail sales end a good week of UK data

Allied to the strong employment and inflation figures out earlier in the week, the UK enjoyed another set of robust retail sales data. The headline came in at +9.2% versus the expected 4.5% m/m although there were lower revisions to the previous reading. The reopening of non-essential stores saw consumers flock back to physical stores and this rising consumer confidence should remain solid over the summer. The recovery in the UK is taking shape and this may add pressure to the Bank of England to begin tapering, although the Indian variant of Covid-19 is grabbing the headlines.

EUR/GBP – tale of the vaccines

EUR/GBP is at an interesting juncture, trading around its 50-day SMA at 0.86. After the big move higher at the start of April, prices have been stuck in a 100- point range, give or take, as the vaccine rollouts in both regions has taken on several twists and turns, but mainly positively for Europe. Bears are desperate to reassert their authority so need to see 0.8560 broken to head for the recent lows below 0.85, while the euro supporters will be cheered by the just released PMI data which beat forecasts as the region continues to reopen from restrictions.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Wow! The Risk Rollercoaster Calms Down …

Stock markets went full circle, selling off aggressively as the sharp moves lower in the crypto space took the breath away. But the dip buyers were out in force and with the strong bounce back in cryptos, so risk assets went bid too with US equities posting minimal losses into the close.

US stock futures are modestly lower with the Vix, Wall street’s fear gauge, moving above 23.

Fed timeline

Meanwhile, during all that excitement, the dollar climbed off the floor thanks to the headlines in the FOMC minutes, which mentioned that there was some taper talk among participants. Bond yields moved higher but importantly, the 5-year part of the curve, which is most Fed-sensitive, has retraced most of its move this morning while emerging market FX sold off less than 1% in the aftermath of the minutes release.

The reality is that the Fed will want to see a number of strong jobs reports before any more forewarning about tapering and even then, it is expected to take three quarters to slow its bond buying. Add to that probably the same time frame again before a first rate hike and we are into the first half of 2023 – which is when the market is actually pricing it in.

The greenback found support again at the February lows which corresponds to the early May highs in EUR/USD. Buyers have stepped in today and will again aim for 1.22446 if bullish momentum picks up. The trendline from the end of March low is acting as good support so far this month with the 100-day SMA just above 1.20.

Crypto deleveraging

Intense selling in Bitcoin saw it down over 30% intraday at one point and touching $30,000, before rebounding quite unbelievably back towards $40,000. Other digital coins like Ethereum also got hit, losing a quarter of its value before easing back to losses over 20 per cent. More than $8.6 billion of positions have been liquidated in the last 24 hours.

The worry for crypto fans is that the China clampdown is the start of a wider one by western regulators too. The worry for institutional fund managers is that these assets involve extended leverage so in prolonged periods of volatility, we could get a broader scale of position adjustment in other markets.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Risk On The Defensive

Bitcoin has caught the headlines this morning after falling below $40,000. Two weeks ago, the world’s most popular cryptocurrency was trading close to $60,000 but Elon Musk’s “did he or didn’t” (sell Tesla’s holding) tweet plus a China ban on financial services offering crypto services has hurt the crypto. Prices have just bounced off the widely watched 200-day SMA.

Focus on FOMC Minutes

This current cautious environment is generally good for the dollar which has halted the run of four days of losses so far today. The downtrend from the end of March peak is strong though, with the FOMC minutes released later today not expected to upset markets a great deal. The focus is on interpreting the Fed members’ thinking on the upbeat economic picture and the current assessment of “transitory” inflation drivers. Notably, this April meeting saw Chair Powell state in the press conference that “now is not the time to talk tapering” so the dollar may have a tough time looking for many positives in the minutes.

It’s those “base effects” again…

UK inflation data jumped this morning with the headline more than doubling to 1.5% from 0.7%. For sure, energy prices were helped by the regulator lifting the household cap, but the increase was well known, like in every country’s CPI figures. Going forward, energy prices and reopenings are expected to push inflation higher in the coming months. Wage pressures will also be important as the jobs market comes to terms with the ending of the furlough scheme in September.

GBP/USD had enjoyed three days of gains, propelling it to levels not seen since February. Bulls would like to hold onto last week’s highs around 1.4160 but the bounce from the more important 1.40 support mark should stay the course.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

6 Reasons Behind Gold’s Recent Climb

From a technical perspective however, a near-term pullback may be healthy and necessary in order to clear the path for further gains. After all, its 14-day relative strength index has been flirting with the 70 mark, which typically denotes overbought conditions.

That isn’t to take anything away from spot gold’s start to the trading week – one that gold bulls will be savouring.

Bullion has punched decisively above its 200-day simple moving average, having built on a series of higher highs since forming a double bottom in March, even threatening to fall into a bear market (20% drop from its record high). It dipped below the $1680 line on a couple of occasions in March, only to go on and advance by more than 9% since.

“Perhaps most importantly, gold prices this week have broken out of the downtrend it has adhered to since posting its record high back in August 2020.”

Why are gold prices climbing?

1) Investors’ desire to hedge against inflation
The precious metal is traditionally seen as a way to preserve one’s wealth during times when the prices of goods and services climb higher, eroding consumers’ purchasing power along the way. With markets having grown more concerned about the prospects of faster US inflation, it has helped boost gold prices.

2) The weaker dollar
Gold tends to have an inverse relationship with the US dollar. In other words, as the buck goes up, gold goes down, and vice versa. With that in mind, the greenback has been declining for a third consecutive day, with the dollar index (DXY) falling by about one percent since last Thursday.

3) Stabilizing US Treasury yields
Recall throughout the first quarter, Treasury yields spiked higher which roiled various asset classes, including the zero-yielding yellow metal. However, of late, 10-year Treasury yields haven’t strayed too far away from the psychologically-important 1.60% line over the past month, while real rates on the same tenor are falling back deeper into negative territory. All that has created a more conducive environment for gold to explore more of its upside.

4) Volatility in cryptocurrencies
In recent months, markets had been questioning gold’s suitability as an inflation hedge, with some segments of the market apparently preferring alternative assets. However, given the volatility seen in the likes of Bitcoin of late, it appears that investors are flocking back towards an asset that has stood the test of time.

5) ETF inflows
The flow of funds in and out of gold ETFs have had a major say on spot prices. According to Bloomberg data, these bullion-backed ETFs have been adding on troy ounces of gold for a 7th straight day, which is the longest streak of additions since 6 January. Although on a year-to-date basis these ETFs have net sold about 6.63 million ounces of the precious metal, recent purchases suggest that investors are coming round after a tumultuous Q1.

6) A dovish Fed
Policymakers at the world’s most influential central bank, the Federal Reserve, have repeatedly assured markets that the inflation surges are likely to be temporary. Hence, the Fed is in no rush to pull back its support for the financial markets, nor bring forward any US interest rate hike. Although markets took some time to buy into that messaging, the repeated assurances by Fed officials have enabled gold prices to climb higher.

What else could move gold prices this week?

  • The minutes from the latest FOMC meeting, to be released on Wednesday, could offer more clues about the Fed’s inflation outlook. More signs that the Fed is willing to tolerate an inflation overshoot could spur on gold bulls.
  • Thursday’s weekly US jobless claims could be key as well. Another better-than-expected reading on the labour market could prompt investors to raise their expectations for faster US inflation, adding to gold’s gains in the process.
  • The rest of the week is also set to feature more speeches and appearances by Fed officials. Any hint about the Fed’s outlook on the US economy and consumer prices, and the eventual policy response by these central bankers, could also move gold prices and the dollar.

Could we see $2000 gold?

Markets are currently pricing in just an 8.4% chance that spot gold would breach the $2000 mark by the end of this quarter.

While there appears to be plenty of tailwinds in play at the moment, gold prices still have another 7% to make up for before reaching that psychologically-important mark.

“Gold bulls would need a significant ramp up in any of the 6 reasons listed above in order to close that gap and achieve the $2000 handle once more.”

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Markets Gripped By Inflation Concerns

Wall Street slipped on Monday, dragged down by declines among technology shares as concerns over rising prices soured risk sentiment. Although Asian stocks opened firmer this morning and US futures are positive, caution ahead of Wednesday’s FOMC meeting minutes could limit gains across equity markets.

Federal Reserve policymakers have repeatedly played down the inflation risk as transitory. However, the volatile movements witnessed across financial markets recently suggests that investors think otherwise. If inflation proves to be longer lasting, this could force the Federal Reserve into action sooner rather than later. Such a development would be bad news for equity markets, especially expensive growth stocks sensitive to higher interest rates.

Dollar Index dips below 90

The dollar stumbled into Tuesday’s trading session under renewed pressure thanks to dovish comments from the Fed’s Clarida who indicated that it is too soon to talk about tapering, citing the weaker than expected April labour market report. Dallas Fed President Robert Kaplan, a known “hawk”, also spoke on Monday and said he believed price pressures would moderate in 2022. The Greenback has weakened against every single G10 currency this month with the Dollar Index (DXY) approaching levels not seen since late February. If the DXY secures a solid daily close below the 90.00 psychological support, this signals further downside with 89.70 acting as the first level of interest.

Eurozone GDP in focus

The euro slightly weakened against every single G10 currency excluding the dollar and Japanese yen on Tuesday morning ahead of the second estimate of the Eurozone GDP numbers. According to the flash estimates back in April, the European economy shrank 0.6 percent in the period from January to March 2021 and the euro may offer a muted reaction if the second estimate meets expectations. Looking at the technical picture, EURUSD has the potential to push higher if a solid daily close above 1.2170 is secured, a move fuelled by the weaker dollar.

Commodity spotlight – Gold

Gold bulls continue to draw strength from a weaker greenback and inflation fears. The precious metal has gained 5.7 per cent this month and could extend gains as inflation concerns continue to grow. Where the metal closes this week may be influenced by the FOMC meeting minutes, but a solid break above $1870 could open the doors towards $1900.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Technical Outlook: EURUSD Breakout On The Horizon?

As US Treasury yields fell slightly and weighed on the Dollar, this pushed the EURUSD to an intraday high of 1.2168 before prices later retreated below the 1.2150 level.

Looking at the daily timeframe, the EURUSD is certainly in an uptrend. There have been consistently higher highs and higher lows since the start of April 2021 with prices respecting a bullish channel.

However, bulls seem to be having a tough time cracking the resistance around the 1.2150 – 1.2170 regions.

After peaking around 1.2180 last week, the currency pair tumbled as low as 1.2050 which became the new higher low. Should prices fail to secure a solid daily close above 1.2170, the EURUSD may experience a pullback towards 1.2050 and 1.2000, respectively.

Alternatively, a solid breakout above 1.2170 could signal an incline towards levels not seen since late February above 1.2240. Lagging indicators are currently swinging in favour of bulls with the MACD trading above the zero level while the 50-day Simple Moving Average (SMA) is back above the 200-day SMA.

Zooming out to the weekly charts, bulls still remain in the driving seat above 1.2050. A solid weekly close above 1.2170 should pave a path towards 1.2240 and 1.2310. If bulls fail to conquer 1.2170, prices could decline back towards 1.2050 and 1.1985, respectively.

Prices are still stuck within a very wide range on the monthly timeframe with support found around 1.1600 and resistance at 1.2300. If bulls can maintain control and secure a monthly close above 1.2300, this may open doors towards 1.2400 – a level not seen since April 2018.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.