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Market Wrap
FOMC weeks are always the hardest for me to trade because they seem to lack any direction. I personally like to buy a pullback and ride the next impulsive wave. The faster the move the better. However, in weeks like these where there is an event that the market is sitting in wait for, playing the ranges is probably the better strategy, unless of course you prefer to go and do something else like fishing.
This morning we had commentary from ECB’s Villeroy, saying the Eurozone sees no risk of durable inflation and monetary policy should remain accommodative. That was just before the EU GDP Flash estimates showed no change from the previous year-on-year or month-on-month data. Then a few hours later we heard from President Christine Lagarde, who stated on that the bank plans to stand by its commitment to protecting and supporting the economy of the Eurozone.
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The US dollar sank to new multi month lows below the important psychological level of $90.00 which gave the EURUSD a pump higher. The price action swept the Feb’21 swing low before pulling back slightly. But it is the Swiss franc that is the strongest of the G-10 currencies going into the London close, with the euro a close second.
The ActivTrader sentiment indicator shows that 67% of traders on the platform remain bearish, even though the Feb’21 swing high and most logical target to the upside is within reach.
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The weaker US dollar has been good for commodities too, though the WTI contract having made a higher high for the month of May pulled back into the range finding support at the daily 20 ema once more. There has been news that the Colonial Pipeline that was a target for a ransomware attack, is now suffering from a communications system failure.
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Gold is still above the day’s open but is struggling to make further gains while 10-year yields refuse to move away from the 1.65% level ahead of the Fed on tomorrow.
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The British pound pierced the 1.4200 level today but has found it too hard a resistance line to see prices accept higher. The days momentum has been strong, and it was inevitable that profits would be taken at such a key level. The daily moving average are all curling higher showing momentum is gaining to the upside and that should carry price through bar any major reversal in the US dollar. The Bank of England governor today gave a speech and commented on negative rates and QE. Saying that the effects of QE “vary over time”, that QE is an important tool in lowering “longer-term borrowing costs by companies and households through the purchase of assets from the private sector.” And that negative rates are “useful” to have them as a “possible tool” but stressed the BoE is “nowhere near” talking about potentially using them yet.
The world’s major indices traded mixed today with the Nikkei and Hang Seng posting 2.09% and 1.42% gains respectively, while the DAX and FTSE both ended up red at the London close.
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The DAX has fallen off the new all-time high in what could be a fake break to the upside after yesterday’s price action was an inside day to last Friday.
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