After last week’s big gains, the Dollar Index paused to take a breather during early Monday trading. Investors were startled by the Fed’s surprising hawkish pivot, which brought to a halt the reflation trade that had supported stock market gains and higher bond yields over the last few months. This will be an interesting week as we will be able to gauge how the markets digested the unexpected bringing forward of the estimated timing of the Fed’s monetary policy tightening. The release of US GDP data later in the week may provide further clues to the likely near-term behaviour of the greenback.
The black gold is starting the week on a mixed tone amid uncertain short to mid-term market sentiment. While oil related shares are drifting, the fact the US Dollar is holding onto last week’s gains is keeping a certain bearish pressure on the barrel’s price. On the other hand, lagging talks between Iran and other nations are postponing increasing oil supplies are helping to sustain prices and keeping the possibility of higher highs alive on a short-term basis. Technically speaking, light crude remains in its mid-term bullish channel, trading higher and higher following its rebound over $70. A clearing of resistance at $71.70 will open the way to $72.25 and $72.90 by extension.
European shares followed the trend from Asia on Monday by opening significantly higher, as the market correction continues. Investors continue to digest the hawkish shift from the Fed, reducing their exposure to riskier assets while waiting for more hints on a timeline for the tapering of the current massive bond buying program. Meanwhile, cyclical values are among the worst performers everywhere as the Delta variant continues to weigh on the reopening of economies. However, the technical situation doesn’t appear to be so dramatic for EU benchmarks yet as most markets remain in their mid-term bullish channel. The Stoxx-50 Index is still trading well above the 4,000pts level where bull traders are strong and numerous enough to prevent prices from drifting further. All eyes are likely to remain on monetary policies this week with traders waiting for Christine Lagarde’s appearance before the EU parliament today and Jerome Powell’s speech later this week.
Pierre Veyret– Technical analyst, ActivTrades
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Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.