Equity markets remain bid as the US dollar’s decline continues. Gold forms an ascending triangle against the $1,900 level ahead of the Core PCE data later in the trading week.
The US dollar started the trading day on the same weak note it ended yesterday. The Asian session did not bring anything new, and, at the time of writing this article, the EUR/USD, AUD/USD, or the GBP/USD pairs made a new weekly or monthly high.
Despite the Fed hinting at tapering on the horizon, the market participants took it as old news. After all, investors do expect at some point in the future that the Fed will scale down its accommodative measures – and this is what the Fed Minutes said, that, at some point in the future, asset-purchases will be scaled down.
Equity markets love the price action in the US dollar. As such, the US tech index, the Nasdaq 100, closed yesterday above the 13,700 level, the German index opened today flat but above 15,400, and the FTSE100 sits comfortably above 7,000 points.
Commodities look bullish too. Gold forms an ascending triangle against $1,900, and a break above should trigger more advances. Oil threatens to break above $66 yet again, fueled by hopes of a strong economic recovery.
The economic calendar on the day remains light, and it will stay like this for the entire week. The Core PCE data will be closely monitored by traders on Friday, as it has the potential to strongly impact the positioning into the last month of the quarter.
FOMC member Evans speaks later today, and so does Quarles. Still in the North American session, the Consumer Confidence is expected at 119 – any positive surprise should put an extra bid behind the equity markets.
Markets to Watch
Gold, FTSE100. EUR/JPY – markets in focus today.
Gold formed an ascending triangle in the last few days, and it threatens to break above horizontal resistance. A move above $1,900 should trigger more strength, as the measured move of possible pennant hints to $1,975 and beyond.
The FTSE100 has consolidated lately in a huge horizontal triangle. At this point, the triangle may act both as a reversal and a continuation pattern. A move higher should trigger more strength only if the index is able to close above 7,160 points. On the flip side, a move and daily close below 7,000 is bearish.
The EUR/JPY cross found strong support at the 132.50 area that acted as resistance on the move to the upside. Therefore, while above, the bias remains bullish. However, a move below and a daily close below the pivotal level should trigger more downside.
Winners and Losers
Things are almost unchanged when compared to yesterday – the US dollar’s decline continues, gold remains bid, as do the equity markets.