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market review 07 April 21

07 April 21

Dollar retreats on growth optimism ahead of Biden, FOMC minutes

The market mood remains upbeat amid better growth expectations. The drop in US yields is dragging the dollar down. President Biden is set to provide an update on his spending plans and investors eye the Fed’s minutes to see if there is a tendency to raise rates. Cryptocurrencies are consolidating previous gains.

The International Monetary Fund (IMF) boosted its global growth forecast to 6%, yet noted divergences between countries. Vaccination campaigns and fiscal stimulus are behind the upgraded projections.

The US dollar is on the back foot as US Treasury yields dropped to around 1.65% as investors buy bonds after the previous sell-off related to upbeat US data. The latest such figure was the JOLTs job openings, which smashed estimates with 7.4 million in February.

US President Joe Biden is scheduled to deliver remarks on his proposed infrastructure and tax program. Democrats will be able to pass such the $2.25 trillion scheme without Republican support according to a ruling by the Senate parliamentarian. Negotiations within the party are critical to its passage.

Biden brought forward the goal for offering vaccines to all Americans from May 1 to April 19, adding to the upbeat mood.

The Federal Reserve’s meeting minutes from its March meeting may shed some light on how many members see interest rate hikes coming sooner rather than later. The Fed is more optimistic than beforehand but urged caution.

GBP/USD trades close to 1.38, consolidating its falls despite Britain’s upbeat vaccination campaign, which will receive another shot in the arm from the usage of Moderna’s vaccines.

EUR/USD took advantage of the upbeat mood and topped 1.1850 on Tuesday after the EU brought forward vaccine projections. The bloc aims to surpass half of the population by the end of June. On the other hand, concerns about AstraZeneca’s jabs persist. An update about a potential link between the inoculations and blood clouds is due out later in the day.

WTI Oil edged up toward $60 amid better expectations for global growth, but prospects of Iran coming back online weigh on prices. Oil inventory data is awaited.

Gold Price Analysis: XAU/USD fails at $1745 as cautiousness reigns ahead of the FOMC minutes

Gold witnessed a modest pullback from the $1,745-46 supply zone during the Asian session on Wednesday and eroded a part of the overnight gains to two-week tops. As FXStreet’s Haresh Menghani notes, XAU/USD bulls turn cautious ahead of FOMC minutes.

Wednesday’s key focus will remain on the release of the FOMC meeting minutes

“Investors remain convinced that stronger fundamental will force the Fed to raise interest rates sooner than anticipated. Any clues that the conditions to begin tightening were discussed at the meeting held on March 16-17 should weigh on the non-yielding yellow metal.”

“The recent rebound from multi-month lows faltered near the $1,745-46 heavy supply zone. This should now act as a key pivotal point for intraday traders, above which the commodity is likely to accelerate the move towards the $1,760-65 support breakpoint, now turned resistance. A sustained move beyond will validate a bullish double-bottom formation near the $1,677-76 region and set the stage for additional gains.”

“The $1,720 horizontal level is likely to protect the immediate downside. This is followed by the $1,700 mark, which if broken decisively will negate any positive bias and turn the commodity vulnerable to retest the $1,677-76 region.”

EUR/USD Outlook: Bullish momentum stalls near 200-DMA, focus remains on FOMC minutes

The EUR/USD pair gained strong positive traction for the second consecutive session on Tuesday and surged to two-week tops. The momentum also marked the fourth day of a positive move and was sponsored by a combination of factors. The shared currency got a strong boost from reports that the EU may hit its vaccination target much earlier than projected. Bloomberg – citing an internal memo from EU member states – reported that Germany, France, Italy, and Spain will have sufficient supplies to vaccinate at least 57% of their total populations by the end of June. Apart from this, the better-than-expected release of the Eurozone Sentix Investor Confidence Index, which jumped to 13.1 for April, further underpinned the euro.

On the other hand, the US dollar struggled to preserve its intraday gains and was pressured by the recent decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond retreated further from a 14-month high level of 1.776% touched last Tuesday amid reduced bets for an earlier than anticipated Fed rate hike. It is worth recalling that the prospects for a relatively faster US economy recovery had raised doubts that the Fed will retain ultra-low interest rates for a longer period. Hence, the focus will be on Wednesday’s release of the latest FOMC monetary policy meeting minutes.

Short-term technical outlook

From a technical perspective, the recent bounce from the 1.1700 mark, or multi-month lows stalled near the very important 200-day SMA. This is closely followed by the 38.2% Fibonacci level of the 1.2243-1.1704 recent leg down, around 1.1900-10 region, which if cleared decisively will set the stage for additional gains. The pair might accelerate the momentum further towards the 1.1980-85 supply zone, which coincides with the 50% Fibo. level. Some follow-through buying beyond the key 1.2000 psychological mark will negate any negative bias and pave the way for a further near-term appreciating move.

On the flip side, any meaningful slide towards the 23.6% Fibo. level, around the 1.1830-25 region might now be seen as a buying opportunity and remain limited. That said, failure to defend the mentioned support, leading to a subsequent slide below the 1.1800 mark might turn the pair vulnerable. The next relevant support on the downside is pegged near mid-1.1700s before the pair eventually slides back towards challenging multi-month lows, around the 1.1700 mark.

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