Consolidation is the name of the game in financial markets, as equities, commodities, and even currencies move in tight ranges. With only a couple of trading days left in the week, investors will likely position for next week’s main events.
The U.S. equity indices remain close to all-time highs. Because of their reluctance, the stock market indices in Europe are trading at the highs as well, with the Dax index the best example.
The price action on the currency market remains mixed, with the U.S. dollar losing against some peers while gaining against others. The most important price action seen lately comes from the EURUSD pair, which rose from 1.17 last week to 1.19 yesterday.
Even commodities trade in a tight range, with the crude oil price movement being representatives – it just hovers around the $60 level. Gold and silver remain unchanged, too, with gold still having a bid tone.
Two main events are worth watching today. One is the ECB Monetary Policy Meeting Accounts, and the other one is the Fed Chair Powell intervention at the IMF Meetings.
The first event is important for the euro pairs because the “significant increase” in the PEPP purchases, as announced by the ECB at its last meeting, is not seen in the weekly statements so far. Hence, confusion surrounds market participants, and this may be the reason behind the recent EURUSD rise.
As for the Fed’s Powell, every time the Chair of the Fed speaks, the market listens. Hence, if we are to see some volatility surrounding the U.S. dollar pairs today, that would be the time to expect it.
Markets to Watch
FTSE100, EURUSD, WTI crude oil – markets in focus today.
FTSE100 finally shows signs of life. After it broke higher out of a triangle that acted as a continuation pattern, it found support on the upper edge of the triangle. At this point, bulls may consider two things.
One is a move beyond the pre-pandemic highs. After all, if other stock market indices around the world did it, why not FTSE100 too?
Another is the measured move of the pennant formation, which points to even higher levels. All in all, FTSE100 remains bid while above the upper trendline of the triangular pattern.
The technical picture does not reveal a significant pattern on the EURUSD pair, but it does show the importance of the 1.20 level. The round number acted as strong support on the move to the downside and resistance on the first attempt to the upside. After an inverse head and shoulders pattern in late March, the EURUSD pair appears bid enough to stage another run to the 1.20 level.
WTI Crude Oil
The WTI crude oil price is in a consolidation area around the $60 level, and the triangular pattern that forms there looks bearish. If a bearish breakout follows, look for the $52 level to provide some support on the move lower.
Winners and Losers
Euro is the winner of the last trading day, as it gained against the JPY, the GBP, and the USD. Crude oil remains weak, and one should not discard further corrections.