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Morning Brief
Last night’s FOMC meeting passed as expected with no material change to the Federal Reserve’s monetary policy. The news media outlets are trying to make a big deal of comments by a few members of the board which boiled down to, they should start thinking about, talking about, maybe raising rates if the PCE inflation gets above 2%. But for anyone caught in a trade that went against them based on those comments, I think the knee jerk reaction gets unwound.
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The US dollar rose off its lows by 60 cents, which equates to roughly halfway back from the recent swing high from the 13th of May 2021. Overall, the US dollar index is still very bearish and hovering just above the $90.00 price level.
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The appreciation in the US dollar made the GBPUSD fall further away from the 1.4200 resistance level and tomorrow’s economic calendar shows that we receive retail sales and PMI data, which could potentially weaken the pound further.
The ActivTrader sentiment indicator still shows the majority of traders are short the currency pair.
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The EURUSD is also heavily shorted by retail traders, but the price action yesterday did not undo Tuesday’s range and so far in the London session this morning the single currency is finding a bid. Yesterday’s high cleared the stops above the February swing high and so I am thinking the next test of 1.22500 sees the price of the euro go higher as most of the sell orders will have been filled already.
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The price action in Gold yesterday ended up with an indecision candle as the opening and closing prices were very similar. Gold still remains bullish above $1850 and yesterday’s low and the daily period moving averages are showing the increasing momentum to the upside. The 50 ema is about to cross the 200 ema on the daily chart which will be a signal to momentum traders that they should be looking for longs.
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Oil prices slipped but found support at the 50-day ema, which has been a dynamic level of support for 6 months now. I fully expect the day to end green if the US dollar can once again get below the key $90 level but demand uncertainty from increased covid cases around the globe and especially from India is going to hold the bullish momentum down for the foreseeable future.
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Japanese data in the Asia-Pac session was not great with machine orders coming in less than expectations but thankfully above last month. Japan’s exports also missed analysts’ expectations but showed an increase month-on-month, rising up by 38% in April. The USDJPY is stuck in a larger consolidation range as a weaker US dollar and fewer uncertainties to the global economy are weighing on both currencies.
