[Market Review].
The US Dollar Index bottomed out. The dollar index oscillated upward during the day and returned above the 90 mark. Early this morning, the Federal Reserve released the minutes of its April FOMC meeting. Overall, the minutes showed that a period of easing is needed before substantial progress can be made. Officials judged the current policy stance and forward guidance to be appropriate. However, some officials expect the Fed to begin discussing QE tapering at a future meeting. this has stimulated market discussions on tightening monetary policy, and traders have raised their expectations for a Fed rate hike. The European dollar futures market now expects that by the end of 2022, the Fed could raise interest rates by about 20 basis points. The minutes unexpectedly mentioned QE tapering, helping the dollar’s desperate comeback.
Gold rose and then fell. Gold, on the other hand, took a big hit after the Fed’s minutes were released, falling below $1,870. Gold had previously jumped to a four-month high of $1,889.84, benefiting from stock market weakness, inflation concerns and a plunge in cryptocurrencies.
Silver failed to hold on to its gains. The trend in silver was somewhat similar to that of gold. Silver touched $28.2 during the day, then failed to stabilize its gains and has now fallen back below the $28 mark.
The euro is under pressure to the downside. Likewise, non-US currencies also suffered a blow. The euro fell by more than 50 points against the dollar during the day and is now trading around 1.2170.
The British pound once fell below the 1.41 mark. In addition to the euro, the pound also fell more than 60 points against the dollar, once below the 1.41 mark, and then back above the mark.
U.S. oil fell more than 3%. In the oil market, U.S. oil continued to come under pressure to the downside, falling more than 3% during the day. EU plans to ease travel controls for vaccinated travelers. Although Europe eased epidemic restrictions, the outbreak of trichinosis, as well as hurricanes, added to India’s woes. Global demand varies widely, with improving demand conditions in the West and deteriorating demand prospects in Asia. This mixed picture has increased market volatility. The EIA crude oil inventory released last night recorded an increase of 1.32 million barrels. Meanwhile, the Iranian president said that significant progress was made in the new round of Iranian nuclear talks. This all puts downward pressure on oil prices.
Bitcoin plunged to near $30,000 at one point. Finally, a look at bitcoin. Bitcoin crashed big time, falling to near $30,000 at one point. It then pulled up violently by $10,000 and is now trading near $37,000.
As bitcoin and related assets take up a larger and larger share of the financial markets, they are also under increasing scrutiny from regulators around the world, which has heavily set back bitcoin.
In addition, part of the reason for the plunge in bitcoin’s price is that the theory that the cryptocurrency will be more widely accepted has been called into question. Previously major prominent institutions added bitcoin, however, Musk announced last week that Tesla will no longer accept bitcoin as a form of payment for car purchases. However, in his latest statement, Musk posted on his personal social media accounts that “Tesla has diamond hands”. Diamond hands represent those who have a strong position, so some market opinions interpret this to mean that Tesla will not sell off its existing bitcoin holdings, which has narrowed bitcoin’s losses.
[Risk Warning].
European economic outlook is optimistic. Euro is expected to stand at 1.2243
Bank of Tokyo-Mitsubishi UFJ remains optimistic about the outlook for the euro against the dollar over the next month, with the next key resistance level at the Feb. 25 high of 1.2243, followed by the annual high of 1.2349 recorded on Jan. 6. The EU now offers more vaccines per capita than the U.S. and is on track to meet the 70% adult vaccination target by mid-July at the current pace. With hospitalizations and deaths falling sharply, there is increased confidence that economic activity in the eurozone will rebound more strongly from the middle of the year. the June ECB policy meeting will be important in setting the quantitative easing program beyond the second quarter. If the ECB releases a tapering signal, it will help boost the euro.
The pound may continue to rise, focusing on the highs 1.4238
Commerzbank’s technical analysis suggests that GBPUSD will gradually rise towards the February high of 1.4238-1.4245. if it breaks out of this range, it will point to the 2018 high of 1.4377. on the downside, 1.3861 and 1.40-1.4018 are important supports. The analysis also highlights that GBPUSD remains bullish as long as the uptrend line at 1.38 is held.
Bitcoin still has downside room or may go down to $27,199
Institutional analysis says the next key support level for bitcoin could be 10% lower than Wednesday’s intraday low. That level corresponds to $27,199.54, the 38.2% Fibonacci retracement of the entire rally from the early lows of the epidemic to the highs of April this year. Until then, the $30,000 psychological barrier should provide some support, but a drop below that level could attract more selling.
[Risk Warning].
19:50 Lagarde may maintain a cautious stance
Let’s first focus on the upcoming speech by ECB President Lagarde. In last month’s press conference, she said that the global demand recovery supports the economy, the eurozone economy may contract again in the first quarter, and the economy will resume growth in the second quarter; she said that inflation expectations are at a low level and the rebound in inflation is due to temporary factors, and that headline inflation may rise in the coming months. In this context, Lagarde reiterated the ultra-loose monetary policy stance, negative interest rates are an effective tool to provide stimulus and will not use yield curve control. For bond purchases, she said it was too early to discuss tapering. Later, she added that the economy may rebound strongly in the second half of the year as vaccinations increase, but the economy still needs monetary and fiscal policy stimulus.
Taken together, we expect that Lagarde is likely to be confident that the economy will rebound, but will reiterate her accommodative monetary stance, saying that it is not yet appropriate to discuss tapering of bond purchases. Special attention needs to be paid to her statement on bond purchases, and the euro could strengthen if she hints that the ECB may make adjustments in bond purchases.
20:30 U.S. initial claims may continue to be low
Next, let’s take a look at the initial jobless claims that will be released in the US. In recent weeks, U.S. initial claims have continued their downward trend, with last week’s release at 473,000, the lowest since the week of March 14, 2020. Agency commentary said jobless claims fell to a new low as business confidence strengthened and employers sought to fill open positions left by restrictions. The labor market continues to improve as more Americans get vaccinated and consumer demand increases, helping to spur economic activity. Hiring is expected to continue to accelerate as more companies and states lift restrictions.
Currently, the market expects that the number of initial jobless claims in the U.S. for the week to May 15 will be 450,000. If the published value is much higher than expected, the dollar index may come under pressure; conversely, if the published value is less than expected, the dollar index may strengthen.
The market generally expects that the number of initial jobless claims will gradually decrease, which will have some support for the dollar index.
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