The US dollar decline continues and fuels the assets’ rally. The stock markets are back at the highs, while Brent oil trades above $70.
An important day for the euro and Europe has started, as today the German Constitutional Court in Karlsruhe decides on whether its judgment on the European Central Bank’s PSPP programme has been respected by the Bundesbank. While no one expects a surprise, you never know what the outcome would be. The worst that can happen is that the court will forbid the Bundesbank from further participation in the ECB’s PSPP programme.
The US equity markets have come back strongly from last week’s lows and now may reach an all-time high. The Dow Jones is back above 34,400, and the S&P500 trades with a bid tone too.
The US dollar weakness helped financial markets recover, as the Dollar index is back at the lows seen at the start of the trading year.
On the commodities front, WTI crude oil had a remarkable comeback, now trading $4 above the $63 level seen at the start of the trading week. Brent oil trades even more aggressively, exceeding $70 for the first time since the COVID-19 pandemic. The economic recovery and the gradual opening of the world’s economies have boosted the price of oil.
The UK jobs data is already out, and much better than the market expected. The Unemployment Rate continues to fall, reaching 4.8%, and boosting the British pound across the FX dashboard.
Later in the North American session, the building permits and housing starts will show the state of the housing sector. The number of building permits is a leading economic indicator, and if data is out better than expectations, it should boost the positive sentiment further.
The key event, as mentioned at the start of this article, comes from Germany. Any surprises there might be critical to the euro in the short term, although the consensus is that the court will not rule against the ECB’s asset-buying.
Markets to Watch
EUR/USD, GBP/USD, WTI crude oil – markets in focus today.
The EUR/USD bullish price action continued this week. From the 1.21 last week, the pair moved in a vertical line, and now finds some dynamic resistance against the upper edge of a rising wedge pattern. A move below 1.21 spells trouble for bulls.
The GBP/USD pair broke above 1.42 on the much better-than-expected jobs data. The market remains bullish, although a rising wedge pattern may be spotted on the 4-hour timeframe. Nevertheless, while above the lower edge, bulls will likely step on any move lower.
WTI Crude Oil
Oil dropped to $63 before recovering strongly and now has achieved a new higher high. While in the upper half of the rising channel, the price of oil remains bullish, fueled by a weak dollar and strong economic recovery worldwide.
Winners and Losers
The British pound and the euro area are the main winners of the trading week so far, as well as crude oil. The US dollar’s weakness remains the theme of the week.