The US dollar is gaining ground on the other major currencies during early Wednesday trading, ahead of the Fed’s policy statement later today. The greenback’s performance has been to a large extent dictated by the markets’ attempt to anticipate the beginning of the tapering by the central bank, with inflation the primary catalyst for a change of direction. As things stand, despite signs of rising prices resulting from a steep increase in economic activity, it is probably too early for Jerome Powell to hint at a change in course, with June being a likelier opportunity for him to do so. Should that be the case, the recent decline of the dollar could be extended.
Having failed to break through the psychological barrier of $1,800 last week, gold is now in a lateral phase between the major support at $1,750 and resistance at $1,800. The slight dip in price mirrors the small recovery on the yield of US 10-Year Treasuries and this along with the recent gains by the dollar are dragging on gold. Despite the recent inversion, the overall outlook remains moderately positive for gold and it is likely to continue trading sideways until a fresh catalyst arrives to shake it out of its $50 trading range.
Most European shares opened higher on Wednesday, following strong data from France, Sweden and Switzerland and ahead of another busy day on the macro front. Market sentiment remains positive as traders cheered solid corporate results from Microsoft, Pinterest and Alphabet. The tech sector is likely to remain the focus of today with investors awaiting reports from Apple and Amazon. Traders will also pay close attention to speeches by Christine Lagarde and Jerome Powell with the wording of both central bankers carefully analysed. Even if the current trading stance stays slightly bullish so far, it seems investors aren’t celebrating the solid earning season in the same way as they have done in the past. The fact that benchmarks are already trading close to record levels is weighing on market sentiment with investors needing further bullish catalysts to remove fears of a correction and drive prices further up.
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.