Currency and Stock Markets. Daily Insights

[stoch]

US data may drive EURUSD lower, providing good buying opportunity


Another leg of USD rally took place yesterday amid sell-off in US equities. The bout of risk aversion was fueled by the comment of the US Treasury Secretary Janet Yellen that a rate hike may be needed to prevent economy from overheating. The caused market turbulence in various asset classes, including stocks and USD, revealed lack of trust of investors to the Fed comments, showing that the Fed pledge to keep rates low and the stance on inflation (“we see inflation as temporary factor”) are taken with a grain of salt. Yellen later clarified that her comment was not a recommendation or a forecast for an interest rate hike, which is not surprising, because just a week ago we saw very cautious Fed rhetoric regarding rate hikes. Fed Speaker Charles Evans' speech today is likely to address market rumors sparked by the Yellen remark.

The last three upside swings in USD were distinguished with length of the waves getting progressively shorter, while meeting resistance at the two-week high of 91.40:

Such a price action, together with the stabilization of ATR and RSI near their averages, often precedes a breakout move. Taking into account the pressure of buyers its vector will likely be positive. The breakdown catalyst is expected to be the Non-Farm Payrolls report on Friday.

Two other reports to look out for are the ADP US Job Growth Data and the ISM Service Sector Index. They will play an important role in shaping expectations for the NFP. The ADP is expected to point to an increase in jobs of 850,000 in April, while the ISM index is expected to rise from 63.7 to 64.3 points. Particular attention should be paid to the hiring component of the ISM index, as its predictive power in relation to the NFP report is quite significant. The two strong reports also once again could cast doubt on the Fed's ability to maintain current degree of monetary easing, which, in particular, may result in faster growth in long-dated bond yields. As I wrote on Monday, news and data flow this week favors tactical strengthening of USD as the reports on the US economy take central place in the economic calendar this week and risks are shifted towards positive surprises in the data.

For EURUSD, the breakdown of lower border of the trend channel disabled it for some time, but there was no particular rush to sell near the critical 1.20 level as seen from little pressure in RSI:

In this regard, the level can equally act as a foothold for growth after completion of the correction. The 1.1950 test on the release of US statistics looks like a logical scenario, but let’s not forget what drove the recent strengthening of EURUSD - progress in vaccinations, European fiscal stimulus and economic data. Next week, the news background is expected to be more favorable for the growth of the European currency.



Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[stoch]

US data disappoints, laying the groundwork for weaker NFP expectations


Brent price failed to break above the $70 level on Wednesday, as buyers' appetite is still constrained by some demand risks. Concerns about demand in India as well as expectations that OPEC will soon begin to lift output restrictions weigh on prices. Recovery of Iranian supply also makes growth more cautious. Although it now seems that the market will be able to absorb new supply, there are risks that the outlook for demand will become less optimistic, which will lead to a more fragile balance in the market.
Saudi Arabia has announced its June OSP prices and, given OPEC's concerns about demand and upcoming production increases, prices for Asia have been cut an additional 10 cents. The Saudis have also lowered prices for other regions, for example for Europe the over-benchmark premium has been reduced in all grades. However, US prices have been raised. The multidirectional movement of price discounts for different regions suggests that OPEC evaluates the prospects for a recovery in demand in different ways, and also takes into account different levels of risks.
The EIA report showed that oil stockpiles in the United States fell by 7.99 million barrels in the reporting week, which significantly exceeded the forecast of -2 million barrels. This strong decline was driven by several factors, in particular increased capacity utilization rates of refineries. Now it is at its highest level since March last year. Oil exports increased by 1.58 mln bpd to 4.12 mln bpd. Only four times in history US oil exports topped 4 million bpd what looks like an indication of a really strong near-term oil demand picture, especially for US supply.
Technically, the corrective rally in oil after breakout of the key trend line took place in a narrowing channel, which indicates a keen buying pressure. The price approached the March high however potential breakout of the main resistance line is likely to be short-lived (false breakout), since risks in the news background are shifted towards neutral and negative events (growth in Iranian output, US shale oil recovery, planned increase in production OPEC, etc.). Most of the positive on the demand side has already been priced in by the market in one way or another:

Yesterday data on ADP and ISM in the US were not as strong as expected which became a major disappointment. The growth of jobs according to ADP was 742K (forecast 800K), the ISM index did not live up to expectations:

With this data in mind, optimism about Friday's NFP declined. This eased pressure on long-term yields and the dollar. The yield on 10-year US Treasuries retreated as less strong labor market growth would mean less acceleration in inflation – the biggest threat of real bond returns currently:

It is clear that the risk of a weaker NFP report has risen, so the markets could start to brace for a negative surprise on Friday. If the report does turn out to be so, the bearish trend in the dollar is likely to resume, as more inconsistencies will appear in the story with higher inflation in the US.


Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[stoch]

Real rates story unfolds not in favor of USD

A number of central banks held monetary policy meetings this week. They clearly showed a tendency to speak or take decisions related to the tightening of monetary policy. Brazil, following the Russian Federation, raised its key rate from 2.75% to 3.5%. Overall, emerging market economies are shifting from talk to action and lift interest rates in response to rising inflationary pressures. The G10 countries have progressed much less in this sense, but those of them that at least talk about raising rates or reducing QE have successfully drawn attention of foreign investors. Among them are Canada and Norway, which were relatively open about their plans to curtail credit stimulus, which sent their currencies higher against USD.

Yet in the US, we have a radically new Fed approach to stimulating growth and employment. It implies low rates even though there is clear progress in inflation. If other central banks are not going to play this melody, and apparently, they are less inclined to do that, their real interest rates will likely rise faster compared with the real rates in the US. Of course, this dynamic will gradually put pressure on the dollar, as investors will follow the Central Banks that tighten policy, thus pushing higher real returns on local assets.

That is why this week we saw emotional market reaction to the awkward remark of the US Treasury Secretary Janet Yellen, that economy overheating may require interest rate hikes to tame it. To avoid confusion with the Fed guidance, she was quick to clarify that she does not predict and does not recommend a rate hike. Yesterday, Fed representative Robert Kaplan said that it is equally important not to be late with policy tightening, as asset market bubbles and excessive risk-taking fueled by low interest rate environment increases vulnerability to actual Fed tightening.
Focus today on April NFP report. The market expects job growth by 1 million. A positive surprise could in theory mean that the Fed is moving faster towards the employment target, and therefore may begin to phase out monetary stimulus earlier. Therefore, a positive surprise in the data is likely to trigger a new sell-off in long bonds and hit the dollar, as from the discussion above, the situation with real rates in the US will change to the worse for the dollar. In addition, in other large economies, data continues to improve, which changes the forecast for local real rates in a positive direction. This includes data on PMI in China, as well as European statistics released this week. A strong NFP report is likely to allow the dollar index to touch the 90.50 level:

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[stoch]

Weak April NFP: What does it mean for Dollar and US stocks?


April Non-Farm Payrolls report was a huge blow to expectations of an early Fed policy tightening. Despite generally strong economic background in April, jobs count printed three times less than the forecast of ~1M. Of the more than 50 surveyed economists by Bloomberg, only two of them forecasted jobs growth below 800K. Unemployment rate surprisingly trended higher as well. The Fed's status quo with regard to low rates and QE has gotten a solid excuse, which together with strong commodity inflation outlook ensures further focus of the debt market on inflation risks. What this means for stocks and greenback is discussed below.

The 10-year Treasury yields, after initial downward spike on fears of slower growth in the US, trimmed decline quickly and closed near the opening on Friday:

What could it mean? Bond investors might not perceive weak job growth as an alarming symptom for the economy: such nuances as a shortage of labor supply due to generous government benefits, significant seasonal adjustments suggested to focus on the trend in US jobs growth, rather than on a single month’s print.

The report removed one of the key hurdles to USD downtrend - the risk of early tightening of the Fed's monetary policy. Risk assets got the welcomed mix of moderate growth prospects and stronger guarantees of cheap liquidity that’s why we saw confident rally on Friday. SPX rallied to new ATH, closing close to a record high, while index futures pulled back only marginally on Monday.

Iron ore futures, one of the benchmarks for commodity inflation, jumped 8% on Monday, which is likely to slowly but surely fuel worries in bonds:

Also on Friday, we saw a new record in inflation expectations in the US following the release of the report:

Given the dynamics of commodity prices, this trend is likely to continue, that is, more downward pressure is coming for real rates in the US. This will also add pressure on USD and spur search for the yield, both in alternative asset classes (stocks) and bonds outside the United States, where the prospects for tightening Central Bank policy are better and inflation risks are less severe than in the US. In terms of the FX implications for the major currency pairs, EURUSD and GBPUSD, we are likely to see continued gains this week with targets at 1.2250-1.23 and 1.42-1.4250 respectively.


Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[stoch]

High inflation concerns could be the reason for more stock market pain


US tech sector saw onslaught of selling orders on Monday, pulling down the universe of risk assets. Nasdaq market cap erased 2.5%, which was the deepest pullback in several months. The rest of equity indices saw less severe declines, however, gloomy sentiment stretched on Tuesday – US equity futures extended decline, strong weakness is also felt in European markets.

Correction in risk assets once again helped greenback to dodge a sell-off. The dollar index bounced off 90 level, however the rebound has fizzled out near 90.35 mark.

Long-term interest rates in the US renewed rally, rising to their weekly high (1.62%).

It’s hard to pin down exact causes of the pullback, however consensus in the media is that anxiety about inflation outlook gained critical mass, provoking sell-off. In fact, in addition to the official data indicating revival of US inflation to the level not seen in a decade, there are some alternative gauges suggesting that inflation rate in the near future may indeed cause economic discomfort. Here is, for example, a comparison of inflation rates and mentions of the word "inflation" in earnings calls of US companies:

The number of mentions soared 800% and considering the correlation of this indicator with inflation rate, the United States can indeed expect a period of relatively high rates of price growth in the near future as firms will likely pass increased costs to consumers.

Inflation has also started to appear more frequently in Google searches:

The number of searches of “inflation” is at all-time high signaling that consumers could become more concerned about inflation outlook. This indirectly indicates that consumer inflation expectations are set to increase further, making it even harder for the Fed to call inflation a transitory phenomenon.

If inflation is really a concern for the markets, Wednesday CPI report may become a new catalyst for equities decline if price growth accelerates considerably above forecasts. So, it could make sense to wait and see April inflation print before trying to buy the dip in equities or enter USD shorts.

Key events for the rest of the week:

- Speeches by representatives of the Fed, in particular, FOMC member Lael Brainard on Tuesday.

- OPEC's monthly report, which will include crucial production and demand forecasts for Q3.

- The US CPI report on Wednesday, which could heighten market concerns about high inflation in the near future.

- Bank of England Governor Bailey is scheduled to speak Wednesday at which the UK's QE reduction will be likely discussed.


Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[stoch]

The risk of commodity markets correction creates buying opportunity in USDCAD


On Wednesday we see first signs of easing bearish grip on equities after the two-day violent selling. European markets are trading in positive area, US equity futures show some signs of distress ahead of the April US CPI release.

The foreign exchange market looks calm today, the slump in US equities offered temporary reprieve to USD. However, greenback fundamentals continue evolve towards more bearish pressure on the currency. One of the key reasons to sell is deteriorating real interest rate outlook in the US. The Fed’s policy tightening hopes were shattered after dismal April NFP release, while the fears of high inflation in the US, even temporary one, continue to mount. The sources of inflationary pressures are rising wages and the strong uptrend in raw materials. Recall that MoM US wage growth in April surged to 0.7% (0% expected), which is a really strong print, likely pointing to some labor shortage issues, while the Bloomberg commodity price index began to grow in early April at worrying pace:

Most likely, a correction in commodity markets will soon follow, which will primarily catch on significantly strengthened commodity currencies, such as AUD and CAD. Therefore, it is reasonable to expect their growth peaking in the near future. Particularly interesting in terms of the prospects for a rebound is the USDCAD pair, which is now at its lowest level since September 2017, which also coincides with the psychologically important area of 1.20:

US inflation is expected to accelerate to 3.6% y/y in April, but given stock markets reaction to inflation fears this week, some upside surprise, like 4% print can be already priced in. Inflation growth above forecasts is likely to keep the pressure on USD, given Fed’s Vice Chair Clarida speech today confirms the commitment to keep rates low despite inflation threat. Nevertheless, the dynamics in the stock market and geopolitics (exacerbating conflict in the Gaza Strip) should be the primary drivers of USD till the end of the week.

The move in USD in the Wednesday morning has barely affected low-yielding currencies, including the euro. Despite a significant improvement in the EU’s virus situation and progress in vaccinations, which creates a strong support in EUR, short-term dynamics will depend on USD moves. The same can be said for GBPUSD, where the recent rally requires both a profit-taking pullback and more data on the British economy. The signal from the Bank of England that policy tightening may start earlier than planned has been priced in by the GBPUSD during the recent strengthening to 1.42. Nevertheless, both the pound and the euro retain prospects for further strengthening against USD, in particular after there are signs that equity markets correction is done and risk-on dominates again.


Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[stoch]

Commodity market rally hits pause putting commdollars under pressure



Risk assets and oil remain under pressure on Monday while gold and other safe heavens are marginally higher. Among numerous market developments we would note stabilization of commodity prices after the rapid growth in April - early March:

The Bloomberg commodity index posted a local top on May 12 and then started to retreat. At the same time, we saw a pullback in a number of market bets associated with expectations of accelerated consumer inflation. First, the yield on long-dated US Treasury bonds started to ease last week:

As it can be seen on the chart, the yield jumped last week on US CPI report release, however it couldn’t sustain gains - having climbed to 1.70%, the yield steadily declined in the second half of the week. Material pro-inflationary surprise in US retail sales on Friday was apparently discounted by the Treasury market as the yield continued to slide on Friday.

Second, commodity currencies, which uptrend were fueled by the rise in commodity prices, embarked on a downtrend: at the time of writing, AUDUSD is down 0.41%, NZDUSD is 0.66%, USDCAD is up 0.23%. At the same time, their weakness could not be attributed to the broad strengthening of the dollar, as the US currency declined against the EUR and GBP.

The commodity market could be under pressure due to the increase in the incidence of Covid-19 in the Asian region last week and related new restrictions. In addition, PPI and the component of input prices in manufacturing PMIs in the US, Europe, and some Asian economies rose strongly in April. For example, in deflationary Japan, wholesale prices rose at their fastest pace in six and a half years, data showed on Monday. High prices for production factors could become an inhibiting factor for activity in the sector, as a result, the demand for raw materials could find a local high. Also, worth noting is the weak data on the Chinese economy, released on Monday. Growth in retail sales has lagged well behind forecasts, dampening risk appetite.

Earlier I wrote that overheated by historical standards commodity market is poised to cool down, which can hit primarily commodity currencies. Taking into account synchronized developments in commodity and Treasury market, commodity dollars, correction could be already under way, which creates selling opportunities. Particularly vulnerable in this regard are CAD, AUD and NZD, which advanced by an average of 9% against the USD since the start of “commodity supercycle” in November 2020.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[stoch]

Oil’s retest of key resistance levels leaves USD vulnerable to attack


The rally in Asian equity markets, positive news flow regarding the virus as well as oil move towards key levels, sparking momentum in the rest of commodity complex, put USD under great pressure on Tuesday. The FOMC Minutes release today may secure the breakout below 90 points in the DXY as the Fed will most likely reiterate its uber-dovish stance that they remain committed to easing. In Europe, the progress in easing of social restrictions lifted bullish sentiment in the Euro.

The next target in USD index is the area of 89.72-89.50, where a medium-term low was formed in the end of February:

In terms of momentum, the move was clearly excessive as seen from the RSI dropping to extreme levels (<20 points). This fact increases chances for a technical pullback from the support area towards 90 level before we could resumption of the medium-term downside.

Brent crude oil benchmark pierced through $70/bbl resistance for the first time since mid-March amid signs of declining global inventories as reopening of economies fuels a boom in demand, including demand for basic commodities like oil. An important signal that sets the stage for bullish oil move is a welcomed decrease in daily cases growth in India which is one of the largest oil consumers in the world. The virus situation in Asia is improving despite a spate of negative headlines hitting the wires in the second half of the past week, as governments managed to avoid worst-case scenario - continued increase in positivity rates and harsher social distancing measures.

Last week, the IEA reported that the oil glut accumulated during the pandemic had been cleared thanks to fast recovery in demand. The news fueled rumors that the market can face deficit in supplies in which lifted prices of near-term contracts compared to longer ones. Futures spreads in the oil market widened signaling that backwardation state intensified.

On the technical front, oil keeps developing a bullish picture. This week we saw a retest of the previous resistance level at $70 while the uptrend remained intact. If quotes manage to close above $70 per barrel, the next target is the level of 71.22 which is the intersection of the upper bound of current uptrend and the prices peak in 2021:

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[stoch]

Economic surprises drive EUR, GBP gains

Asian markets retreated while European equities and US stock index futures failed to sustain recent rebound, turning red on Wednesday. Dollar index rebounded after a dip to the February low of 89.70 amid renewed bearish pressure in risk assets.
Oil has once again failed the task of gaining a foothold above the key resistance ($70 for Brent) and went down. In addition, a negative news background arrived in time - progress on the Iran deal and an unexpected increase in commercial oil reserves in the United States.
The UK inflation data showed that the economy could not escape the fate of other countries - production prices rose strongly amid signs of raw materials shortages and supply bottlenecks. The demand for inventories is rising at the fastest pace in years due to the overreaction of firms to consumer demand boom. Firms are trying to replenish inventories with some excess anticipating more shortage, which basically creates a self-reinforcing loop. Building pressures in producer prices are expected to eventually find way to consumer prices, so pressure on central banks stemming from economic data will likely remain on the rise.
Inflation of retail goods in Britain beat forecast, which is expected to prompt the Bank of England to be among the first to use more aggressive rhetoric. Despite USD bouncing off February lows and adding pressure on the Pound, the British currency appears to be targeting highs of 2021, and then of April 2018 thanks to strong fundamental component (April employment + inflation) and the fact that the uptrend on the daily timeframe still has a large margin of movement - the price is below the median line of the bullish channel:

The European currency continues to stay strong in the pair with USD against the background of the weakening of the latter. The news flow related to easing of restrictions in European countries subdues risks for economic growth which pressures risk premium in EU equities and bonds. Since information of this kind on the US economy were priced in 1-2 months earlier, the equilibrium in expectations should have been restored when the Old World moved to the final phase of lifting lockdowns.
From a technical point of view, the picture for EURUSD is similar to GPBUSD - the peaks of 2021 and 2018 have yet to be overcome:

The Fed is to release the minutes of the April meeting today. The Central Bank has more or less definitely expressed its stance, but the markets do not really believe that the Fed will tolerate growing inflation risks. The content of the Minutes is expected to focus on the pledge to keep rates low, which could potentially have a moderately downside impact on the US currency. However, the risk of resumption of decline in the US markets is increasing, which may again provide unexpected support for the USD.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[stoch]

The risk of early Fed QE withdrawal fails to soothe USD bears


There was a slight increase in bearish pressure on US currency on Monday as support from two key factors – rising long-term US yields and sell-off in risk assets (i.e., stock market, flagged. Equity markets posted weak upward bias, while long-term yields continue their decline that commenced last week.

The attention of market participants and the bulk of volatility has been concentrated on the commodity and cryptocurrency market in the past few weeks. Both markets saw strong ups and downs of different intensity on claims, that Chinese authorities aimed to suppress excessive speculation. The media are exaggerating a four-year-old ban on the use and mining of cryptocurrencies, for some reason presenting it as fresh restrictions. As for commodity markets, an article appeared on a website close to the PBOC that the Central Bank would allow the yuan to strengthen in response to rising commodity prices, which was subsequently removed. In general, all the latest corrections in the asset markets are in some way tied to China.

If China succeeds in cooling down commodity markets, this should have implications for the path of consumer inflation, since production costs (including commodity prices) are its one of the key sources. In this case, criticism of the Fed due to inaction in response to rising inflation should diminish, which will further pressure USD.

Despite high volatility in the commodities and cryptocurrency markets, FX and equity markets appear to be much less nervous. If central banks are currently concerned about speculation in traditional markets, it is only in their financial stability reports, which invariably contain a chapter on excessive speculation. So, nothing unusual here.

Low volatility is known to promote rotation from US assets to high-yielding ones, which is a process with a negative connotation for the American currency. Last week, the risk of early withdrawal of stimulus by the Fed suddenly increased against the background of the publication of the April Fed Minutes, in which "a number" of policymakers expressed their readiness to start discussing the reduction of QE. Contrary to expectations, this brought minimal relief to the dollar. Hence this week, the bearish trend in the USD can be expected to resume. I would consider the target for the dollar index in the area of the last support at 89.65:

ECB President Lagarde with her comments slowed down the rally of European bond yields last Friday, which offered additional support to EURUSD. The EU economic calendar is rather dull this week, the IFO report on German sentiment may increase volatility in the euro, but not for long. The key report this week is likely to be Core PCE in the US, which is slated for release on Friday.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.