Today it is all about the inflation data in the United States. It appears that the entire financial market is waiting for this data if we judge only by the extremely low volatility levels.
As always, when volatility is depressed, stocks remain at elevated levels. The S&P500, for example, made a new all-time high yesterday, and the other stock market indices remain close to their highs as well.
In Europe, the frenzy of the stock market continues. The Spanish index trades above 8,500 points, the FTSE100 is close to 6,900, and the CAC40 sits comfortably above 6,100. The increase in vaccination efforts in the last days sent a wave of optimism in Europe, as the 70% herd immunity target by September is suddenly attainable.
The currency market is really slow this week. For example, the EURUSD pair had a range of only forty-eight pips, hovering around the 1.19 level. When the EURUSD isn’t moving, nothing is moving, so traders simply have to wait for the next thing that may spur some activity.
The market participants expect the inflation or CPI in the United States to show that the prices have increased in the last month by 0.1%. The risk here is that the data will overshoot, as fears of rampant inflation are mounting after the monetary and fiscal stimulus.
New Zealand dollar (NZD) traders will be very busy today as the Reserve Bank of New Zealand (RBNZ) delivers its rate statement and policy overview.
Markets to Watch
Silver, EURGBP, EURUSD – markets in focus today.
Silver has formed a possible double top close to the $30 level and now stays in a horizontal range that should determine the next movement. If the market breaks the horizontal support, then traders will push the price toward the double top’s measured move. If, on the other hand, the price action is strong enough to break above $30, the market participants will stay on the long side for a move equal to the rectangular formation.
The EURGBP cross formed a falling wedge pattern right on important support, and now it should find support yet again on a retest of the upper trendline. That is where new buyers are expected, and the market should not make a new lower low for the reversal pattern to be confirmed.
Make or break time for the EURUSD pair, as it forms a triangular pattern ahead of the inflation data in the United States. The market may break either way here. On the one hand, a bullish breakout points to a pennant formation with a target above 1.20. On the other hand, a bearish breakout hints at a move back to support in the 1.1770 area.
Winners and Losers
The euro keeps trading with a bullish tone, especially against the dollar and the Japanese yen. Once again, the winners come from the U.S. and European stock markets, as investors keep buying stocks. Q1 Earnings starts this week, with major financial institutions opening the season.