Stock markets are on the back foot amid concerns of higher US capital tax increases and rising covid cases in Asian countries. Cryptocurrencies are suffering an extended sell-off. PMIs from Europe, the UK and the US stand out.
The White House is mulling a substantial hike to capital tax gains for high-earners, in an attempt to fund social programs. Passing such legislation would fulfill campaign promises but the news caught markets wrong-footed, with the S&P 500 falling on Thursday the most since March. Global equities are trying to recover on Friday.
US 10-year Treasury yields have stabilized around 1.55%, pushing the dollar lower after safe-haven flows underpinned it on Thursday. The greenback also received support from jobless claims, which surprised with a drop to 547,000. Markit’s Purchasing Managers’ Indexes for April and New Home Sales figures are eyed in the US session.
Preliminary PMIs stand out in the European session as well, with economists expecting them to fall off their highs despite optimism about Europe’s reopening. The European Central Bank moderately upgraded its views in Thursday’s rate decision, saying that medium-term risks are balanced. EUR/USD is hovering above 1.20.
GBP/USD is licking its wounds around 1.3850 ahead of UK Retail Sales and PMIs. The country is set to reach 50% with one vaccine shot in the coming days.
Bitcoin has tumbled down below $50,000, down some 20% from the peak near $65,000 but still some 80% higher year-to-date. Tax hikes, legal issues and an unfavorable technical situation have been cited as reasons for the extended falls.
News on Biden’s tax proposal, US PMIs and covid updates in focus
“The greenback has resumed its bearish momentum amid improving market mood, as investors appear to move past Biden’s tax hike reports. The US Treasury yields are stabilizing after the previous drop, although its impact on the yieldless gold is likely to be limited, as the technical setup remains in favor of the bulls.”
“Markets look forward to the Eurozone and US PMI reports from fresh hints on the post-pandemic global economic recovery. Meanwhile, the covid vaccines and infections updated will be closely eyed as well.”
“A daily closing above the $1800 threshold is needed to revive the double bottom bullish reversal. The 100-DMA at $1804 would be the next bullish target, above which the doors are likely to open up towards the February 24 high of $1814.”
“A drop below Thursday’s low of $1777 is likely to put this week’s low at $1764 at risk. Further down, the confluence of the 21 and 50-DMAs at $1747 is the level to beat for the XAU bears.”
USD/CHF holds lower ground near 0.9167, down 0.03% intraday, ahead of Friday’s European session. In doing so, the major currency pair respects Thursday’s bearish Doji, as well as seller-supportive MACD conditions.
Also backing the USD/CHF bears is the pair’s sustained trading below 50-day SMA, which in turn highlights another attempt to revisit the 200-day SMA level of 0.9089.
During the fall, the weekly bottom surrounding 0.9130 and the 0.9100 round-figure may offer intermediate halts.
Meanwhile, an upside break of the 0.9200 threshold will defy the bearish Doji and could direct the USD/CHF prices toward a 50-day SMA level of 0.9220. It’s worth mentioning that the previous month’s lows add strength to the 0.9220 hurdle.
In a case where the quote rises beyond 0.9220, USD/CHF bulls may not refrain to target mid-March tops near 0.9320 wherein the 0.9250 level can act as a buffer during the rise.
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