The US dollar weakness remains a dominant theme in financial markets after the Non-Farm Payrolls report release. Market participants are preparing for the US inflation and the ECB meeting later in the trading week.
The Non-Farm Payrolls report released in the United States last Friday triggered a bearish US dollar trend. The US economy created fewer jobs than the market expected, and so the dollar declined.
But it could have just been the market positioning for the two main events in the week ahead – inflation in the United States and the European Central Bank decision. In any case, what started last Friday continued at the opening of the London session today, as the greenback still trades with a weak tone.
The stock market indices appreciate the current environment, trading close to or at their all-time highs. In Germany, the DAX index is at 15,680, in the United Kingdom, the FTSE 100 trades at 7,114 and the US futures point to a flat opening. The Dow is seen at 34,750 and the S&P500 at 4,224.
The day ahead is light in terms of economic events, and therefore the market participants will likely use the time ahead to prepare for the critical ECB and inflation data later in the trading week.
Markets to Watch
WTI crude oil – markets in focus today.
WTI Crude Oil
The WTI crude oil price looks to break the $70 mark. Fueled by strong economic recovery in the developed world due to increased vaccination rates, the price of oil is benefitting from increasing demand. From a technical perspective, a drop out of the rising channel suggests a move to the previous resistance area, where the market may find some support.
The EUR/USD pair appears to have formed a triple top at the 1.2250 area. The bounce higher last Friday as a response to the NFP release was not strong enough to break the series of lower highs. Hence, the bias persists that the EUR/USD pair remains weak ahead of the ECB meeting, with the 1.20 area acting as a pivotal level.
Another euro pair in focus this week is the EUR/JPY cross. It has traded with a bid tone for quite a while now, but recently it formed a rising wedge pattern. The break below the lower trendline is bearish and now the market participants focus on the break of the higher lows series. A move below 132.50 should trigger more weakness.
Winners and Losers
The US dollar remains weak, while the stock market continues to trade with a bid tone.