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Market Brief
Markets are forward looking and try and price in the announcements that the Central Banks and Governments deliver to the market on a regular basis. Last night we learned from the Reserve Bank of New Zealand that they were going to keep rates unchanged until their current monetary policy has provided the inflation and employment objectives. They also stated that they expect this will “take considerable time and patience”. The markets had expected the RBNZ to keep rates unchanged at 0.25% and for the asset purchases to be maintained. The results as seen in the markets were for the NZDUSD to be trading 1.00% higher, as is the New Zealand dollar against the rest of the currency majors.
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The NZDUSD is in an upward trend this week, with new highs being made and previous highs below daily closes, the daily moving averages also point to continued bullish momentum and the next logical target would be the February 2021 swing high at the 0.7462 price level.
However, the traders on the ActivTrader platform are convinced that the NZDUSD should be coming down in price with 83% of them short. This is towards the extreme in terms of sentiment, so a capitulation of these traders, covering their short positions will result in a spike higher, and the signal if any to reverse the trade direction will be when they decide to go long.
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The US dollar index is struggling to push lower with any real conviction, though yesterdays close was a new daily lower close and below $90.00. The buying pressure at these current levels is slowing progress but the closer we get to the $89.00 the more these last remaining bulls will give up on being chopped up, and then we can test the yearly swing low once more.
The ActivTrader sentiment indicator is showing that traders are extremely bullish the US dollar June contract, but unfortunately the probability is that they will likely all get stopped out rather than turn the market higher.
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The long-term US bonds are starting to show investors may be getting the hint that the Federal Reserve is not going to raise interest rates soon, as we are seeing bonds make new highs above the daily 50 ema. I fully expect price to compress under the daily 200 ema in the near future and then depending on whether the inflation turns out to be transitory or not, will guide price action from then on in the coming months.
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The DAX made a new high yesterday, but it was more of a look above and close below day, which has followed through into this morning’s price action. The overall trend is to the upside, but the momentum is not following through every time we make a new ATH.
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Oil is keeping its head up and trying to push back into the $67 ranges as Tehran prepares for a sizeable increase in output and exports. Inventory data from the API yesterday indicated that stocks of crude oil in the US fell 0.439 million barrels last week and demand could increase from the Indian continent as India sees a continual drop in daily COVID-19 cases.
