Gold is now the first signs of a pullback, can the short-term attack on the thousand nine?

[Market Review].

The US dollar index fell below the 90 mark again. The US dollar index failed to hold on to the 90 mark during the day and is now down near 89.7.

Since the end of March, the dollar, which is considered a safe-haven asset, has been steadily retreating, due to the market’s optimism about the recovery. However, this decline seems to have slowed down recently. Traders are beginning to expect interest rates to rise when the Fed reacts to signs of rising inflation.

For now, the market has to start digesting expectations that the Fed’s stance will be slightly more hawkish going forward. Data such as U.S. personal consumption and inflation to be released on Friday could drive market expectations that the Fed will become more hawkish at its June policy meeting.

For now, however, the dollar will face some mild pressure as trading kicks off this week. As the global recovery is accelerating, strategists are now trying to predict how fast yields will rise in other countries compared to the U.S.

Meanwhile, traders are also watching the progress of the new U.S. stimulus package. The White House said it has scaled back the size of the infrastructure bill from $2.25 trillion to $1.7 trillion, but Republicans don’t think the changes are enough to reach an agreement.

Gold is stuck in a high level of volatility. Next, let’s focus on gold. Gold prices fell slightly yesterday and basically hovered around $1880. By this morning, the decline had widened and at one point tried to go below $1,870. Gold prices were supported by a sliding dollar and the usual “doves” from most Federal Reserve officials. However, the rise in the stock market and Biden’s plans to continue to scale down the base, hit the market buying. At the same time, the strong rally in cryptocurrencies, also weighed on gold. In the short term, gold prices are sluggish on the upside and could be stuck in a high level shakeout, with the 1900 handle being a huge challenge for bulls. Gold will need more fundamental positives to ferment if it wants to break above that mark.

Silver range oscillation. Silver is moving similarly to gold, mainly in the $27.5-$27.9 range during the day.

The euro rallied above 1.22. Against the backdrop of continued pressure on the dollar, non-US currencies largely saw a rebound. Among them, the euro oscillated upward against the dollar and has now strongly broken through the 1.22 barrier, touching a high of 1.2230.

The British pound saw a rebound. Similarly, the British pound also saw a rebound. After falling to around 1.4110, the pound regained upward momentum against the dollar, soaring to around 1.4170. Bank of England Governor Tony Blair said that inflation will fall back again after exceeding the 2% target, and the impact on inflation is now considered temporary. The pound has appreciated somewhat, which will put downward pressure on trade prices. In addition he revealed that he does not intend to use negative interest rates at the moment.

Bitcoin rises violently. Another look at cryptocurrencies. After last weekend’s plunge, cryptocurrencies saw a violent rebound, with ethereum standing at $2,600 and bitcoin breaking the $40,000 mark. Musk, the “godfather of cryptocurrency,” said he spoke with some North American bitcoin mining organizations and called for regulation of mining energy disclosure. Bitcoin surged higher in the short term after this statement. Bitcoin was also boosted by Bridgewater founder Dario’s “stand up” for bitcoin.

However, countries have now indicated that they will tightly regulate cryptocurrencies, and with multiple short and long term factors, bitcoin’s volatility has become extremely volatile and we need to be cautious.

U.S. oil jumped 3%. Finally, take a look at the oil market. U.S. oil jumped 3% during the day and is now trading near $66, a second straight day of gains. Crude oil demand has been boosted as the U.S. continues to reopen, air travel increases and Europe lifts its anti-epidemic embargo. In addition, Iran’s continued disagreement around negotiations to lift U.S. sanctions also supported oil prices.

[Risk Warning].

The dollar is under pressure in the second quarter but may see gains in the medium term

Credit Fanon said that the tightening of Fed policy will be good for the dollar as the market expects the Fed policy to normalize soon. However, as the rest of the world also began to tighten monetary policy, the Fed’s tightening monetary policy may gradually reduce the favorable dollar effect. Therefore, the bank expects the dollar in the second quarter there are downside risks, but the second half of the year continue to be bullish dollar.

The Australian dollar may continue to move higher target to 0.80

The Commonwealth Bank of Australia said the Australian dollar may continue to move slightly higher against the U.S. dollar this week, with the pair set to reach the 0.80 level by the end of the second quarter. Compared to the fundamentals, the Australian dollar is now undervalued. The bank believes that Australia’s slow start in vaccination compared to and other developed economies may be the most recent headwind for the Aussie. However, if the opening of large vaccination centers can improve Australia’s vaccination rate, then the Australian dollar will be supported.

Inflation is expected to boost oil prices.

JP Morgan noted that the current upside risk to oil prices is the crude oil market’s hedge against inflation, which is expected to pick up strongly, and that investors are likely to adjust their portfolios regardless of whether the rise in inflation is temporary, increasing the likelihood that money will enter the crude oil market. Brewer’s oil is expected to rise to $74 by the end of the year, with an average price of $68 for the year. However, if oil prices are to rise to $100, crude oil demand will have to recover to higher levels than expected and the global crude oil supply/demand balance will need to tighten by about 4 million barrels per day to allow crude oil inventories to fall sufficiently.

Key Forecast

Wednesday 04:30 API crude oil inventories may decrease

First, let’s focus on API crude oil inventories. Last week’s API report showed that U.S. crude oil inventories increased by 620,000 barrels. Financial blog Zero Hedge commented that the progress of the Iran nuclear deal negotiations is currently the primary factor affecting oil prices, and the impact of the Indian epidemic or the reopening of the United States on oil prices is negligible.

Currently, the market expects that the U.S. API crude oil inventories may decrease by 1.279 million barrels in the week to May 21. If the published value is larger than expected, oil prices may come under pressure; conversely, oil prices may rise.

Currently, the U.S.-Iran negotiations are the most important factor affecting the oil market. Iran said that there is still analysis about when the U.S. negotiations on lifting sanctions, a statement that eases concerns about the country’s rapidly growing production. Also the Indian epidemic is under control as well as the widespread vaccination in the U.S., which is also supporting oil prices to some extent.

Wednesday at 10:00 the New Zealand Fed may be optimistic about the economy

Then, come to focus on the interest rate resolution that will be announced by the New Zealand Fed. In the last resolution, the New Zealand Fed kept interest rates and bond purchase program unchanged. The Fed noted that fiscal and monetary stimulus policies continue to support the world economic recovery, but the recovery outlook is still facing a high degree of uncertainty, and economic growth in various countries has diverged significantly. New Zealand’s economic outlook is also highly uncertain, depending to a large extent on epidemic control measures and the recovery of business and consumer confidence. Damaged global supply chains and higher international oil prices are putting upward pressure on prices in the short term, but without prolonged monetary stimulus, New Zealand’s medium-term inflation is likely to remain below the central bank’s target level.

For the future policy outlook, ANZ expects the New Zealand Fed to start raising interest rates in August 2022, with the benchmark rate rising to 1.25% by the end of 2023; this will be ahead of the US Federal Reserve and the Australian Fed. The New Zealand Fed will release an economic forecast report may also further revise the country’s GDP, employment and inflation expectations. But in the process, the New Zealand Fed will also continue to emphasize the need to maintain an accommodative policy “for some time”.

On balance, the New Zealand Fed will keep interest rates and bond purchases unchanged, emphasizing the need to continue to maintain easing, but the Fed is likely to remain optimistic about the economy. If the Fed reveals signals of future tapering of bond purchases or interest rate hikes, the New Zealand dollar may strengthen, so please pay attention.