The dollar is gaining ground to other major currencies during early Tuesday trading, as investors readjust their positioning in relation to the greenback ahead of tomorrow’s Federal Reserve meeting. The extraordinary surprise caused by Friday’s employment numbers, with 2.5 million new jobs created in the US during the month of May, shifted market expectation on tomorrow’s Fed meeting. It is now seen as less likely that the American central bank will issue forward guidance contemplating negative interest rates, something that many investors had started preparing for and triggered dollar losses exceeding 3% between late May and early June.
Ricardo Evangelista – Senior Analyst, ActivTrades
After the surprising run of positive trading sessions in the last few days, stocks are slipping, and we are seeing a temporary return of risk-off. It’s not a big surprise seeing oil declining in this scenario, while gold is gaining strength as liquidity flows back into bullion markets, despite the recovery of the greenback. The spot price of gold has broken through the resistance level of $1,700 and the recovery seems likely to continue if there are further declines on stocks. Vice versa a fall below the recent bottom of $1,680 would be seen by markets as a negative signal, opening space to sellers.
Carlo Alberto De Casa – Chief analyst, ActivTrades
European shares were little changed on Tuesday with this week’s consolidation phase continuing ahead of tomorrow’s Fed meeting. Even if the strong bullish pace on equity markets slowed significantly this week, the lack of sharp downside corrections prevents the current trend from being really threatened. This lateral tone in the very short-term is more seen as the mark of a market pause than a sign of hesitation from traders. Of course, most investors will need further evidence of a quick recovery before increasing their exposure and driving prices to fresh highs. However, the current technical configuration tells us there is a certain degree of market confidence towards improving economic condition on a short to mid-term prospective, which currently keeps on sustaining prices.
The worst performing index this morning is Frankfurt’s DAX-30 Index, which is now trading below 12,700pts. Technically speaking the market is still trading inside the bullish channel that has been in place since early May so the short to mid-term trend remains bullish. However, the recent failure below 12,925pts could lead prices to a limited correction towards 12,560pts and 12,350pts by extension. Both moving averages are still rising and the RSI indicator isn’t showing any sign of a trend invalidation yet, making the current bullish trend invalidation very unlikely today.