The US dollar remains weak across the board and the commodity markets’ rally continues. Equities are at all-time highs, bid on every dip.
The US dollar took a major hit last Friday after the disappointing NFP report. The data showed that the US economy added a lot fewer jobs than expected, and so investors sold the dollar aggressively.
All major currencies gained against the greenback. Moreover, the trend continued on Monday’s opening, with the EUR/USD trading above 1.2170, the AUD/USD threatening to move above 0.79, and the GBP/USD sitting comfortably above 1.40.
The dollar’s weakness translated into a bullish move in the equity markets. As such, the Dow Jones and the S&P500 are trading at record highs. European equities started the week on a bullish note, too, with the Spanish index trading at sixteen months high and the German index remaining bid close to the highs.
On the commodities front, the WTI crude oil seems stuck at the $65 level, finding bids on every move lower. Gold recovered the $1,800 level, and the move higher is seen by many as a confirmation of investors hedging against inflation.
No important piece of economic data lies ahead for the rest of the trading day. Therefore, the London session will likely see the market participants digesting Friday’s report, and by the time the US markets open, the focus shifts to the equity indices.
Markets to Watch
WTI crude oil, EUR/JPY, GBP/USD – markets in focus today.
WTI Crude Oil
Crude oil finds bids on every dip, and the $60 level remains pivotal. The market appears to have formed a head and shoulders pattern, and a break below the neckline should trigger more weakness. However, the series of higher highs and higher lows remains in place, so the path of least resistance remains the upside.
A rising wedge pattern is visible on the EUR/JPY pair. During the later stages of a rising wedge, the price typically pierces the upper trendline before reversing sharply. If that is the case, bulls should be cautious at current levels and a break of the lower edge of the pattern triggers more weakness.
The GBP/USD pair broke higher after the market completed a contracting triangle. It only hesitated for a bit at the round 1.40 level before continuing its rally. The 1.40 will likely remain key to further advances in the pair, a pivotal level for cable.
Winners and Losers
The US dollar weakness remains the dominant theme on the FX dashboard, while the equity markets trade close to their highs.