Global stock markets have been edging up gradually with US indexes hovering near record highs amid optimism about a vaccine and stimulus-led recovery. COVID-19 cases have accelerated their downfall as immunization takes a greater effect.
US 10-year Treasuries have risen back to 1.64%, carrying the dollar higher with them. EUR/USD is pressured around 1.2070 and USD/JPY is rising toward 109. Gold has retreated from the highs, changing hands at below $1,770.
The Federal Reserve is set to leave its policies unchanged but may lay down hints that it would begin tapering bond-buying later in the year. The US economy is booming and signs of rising inflation have been popping up. On the other hand, millions of Americans remain out of work.
US President Joe Biden is set to deliver a speech to Congress and may offer details about his spend and tax plans. Reports suggest he will omit an expansion of the estate tax. Democrats aim to conclude legislation by early July.
Earnings season is in full gear with Google and Microsoft both beating estimates. Apple and Facebook report their results later in the day.
Brexit: An internal political crisis in Northern Ireland is threatening progress on the NI protocol between the EU and the UK. GBP/USD is trading below 1.39.
AUD/USD is pressured around 0.7750 after Australia’s inflation figures missed by 0.6% in the first quarter.
Canada publishes retail sales figures for February, which are forecast to show a pickup in shopping. Crude Oil Inventories are predicted to show a modest draw. WTI is hovering around $63 and USD/CAD is around 1.24.
EUR/USD has been drifting lower as the dollar gains ahead of the Federal Reserve’s decision. Euro is well-positioned for the Fed as better prospects for the old continent make it a contender to gain significant ground, Yohay Elam, an Analyst at FXStreet, reports.
Observing the charts also provides an upbeat picture
“Jerome Powell, Chair of the Federal Reserve, may use the opportunity to pre-announce that the bank would lay down a plan for tapering its bond-buying scheme in June. That is when the Fed publishes new economic forecasts. Signaling a reduction in the current $120 billion/month in dollar printing would cause the greenback to jump. However, such an indication is far from guaranteed, and if he sticks to the script – inflation is transitory, still slack in the labor market – the US currency could suffer a fresh sell-off.”
“Europe has finally picked up speed in its vaccination campaign and is also benefiting from falling COVID-19 cases. After Italy and France began easing restrictions, Spain will reportedly return to accepting British tourists in June.”
“Euro/dollar continues benefiting from upside momentum on the four-hour chart and is holding above the 50, 100 and 200 Simple Moving Averages. The Relative Strength Index is balanced, far from overbought conditions.”
“Initial resistance awaits at 1.2095, the daily high, and that is followed by April’s peak of 1.2117. Support is at the daily low of 1.2060, followed by the round 1.20 level.”
GBP/USD tested resistance at 1.3900 but failed to develop sufficient upside momentum and pulled back.
GBP/USD failed to settle above the resistance at 1.3900 and pulled back. The nearest support level for GBP/USD is located at 1.3865. A move below this level will lead to a test of the support at the 20 EMA at 1.3855.
In case GBP/USD declines below the 20 EMA at 1.3855, it will head towards the next support level which is located at the 50 EMA at 1.3835. A successful test of this level will open the way to the test of the support at 1.3800.
On the upside, GBP/USD needs to settle above the resistance at 1.3900 to continue its upside move. In case GBP/USD manages to settle above this level, it will head towards the resistance at 1.3920. A move above this level will push GBP/USD towards the resistance at 1.3950.
Gold (XAU/USD) dropped on Tuesday but held within its recent trading range between $1800-$1765. This Wednesday, nothing seems to have changed for the yellow metal, as the US dollar trades firmer while the yields hold onto the recent advance ahead of the FOMC monetary policy decision. A test of $1800 or $1750 on the FOMC decision? That is the question, FXStreet’s Dhwani Mehta informs.
Fed’s decision to trigger a fresh direction in gold, Biden’s speech also eyed
“Although the Fed is unlikely to alter its policy stance, investors will pay close attention to any hints on a likely tapering of the bond-buying program, given the optimism over improving economic outlook.”
“The focus will also remain on fresh updates on the fiscal stimulus, as Biden is set to address Congress later on Wednesday.”
“Buyers continue to lurk on every dip towards the 21-DMA. The 100-DMA and 21-DMA lie at $1801 and $1753 respectively. Gold’s fate hinges on the Fed’s announcements while acceptance on a break of either of the two barriers could trigger sharp moves.”
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