The dollar is trading almost flat during the early part of Thursday’s session, as the markets struggle to divine a direction from conflicting messages issued by Federal Reserve officials. While Chairman Jerome Powell minimised the importance of inflation during his testimony to Congress, the Atlanta Fed President, Raphael Bostic, voiced concerns regarding the definition of “temporary”, saying that the current spike in prices may take longer to flatten-out than previously expected. It is becoming apparent that there are two different views coexisting within the Fed and the tug-of-war is likely to condition the performance of the greenback and other currencies, too, over the coming months.
Gold continues to trade inside a triangle pattern between $1,800 and $1,760 with no bullish reversal signs in sight so far. Indeed, the current global optimism has caused traders and other mid-term investors to rotate away from defensive values and safe havens to riskier assets, which represents a strong bearish market driver for gold. In addition, the lack of bearish directionality on the US Dollar is adding to the downward pressure on gold. Technically speaking, the situation isn’t reassuring after yesterday’s false bullish break-out drove the price close to the lower band of their triangle, increasing the likelihood of a bearish trend resurgence in the coming session. A break-out of the triangle would see the price challenge the supports at $1,760 and $1,740 and open the door for the gold to fall even lower.
Shares edged higher on Thursday in Europe with most benchmarks boosted by automakers and banking stocks amid rising global optimism. The recent batch of solid macro data from developed economies suggesting strong ongoing recoveries combined with monetary support still in place in both Europe and the US are seen as major bullish market drivers by investors. This context has boosted market sentiment and may put an end to the current technical correction registered on most indices since the end of last week. Traders will however keep an eye on today’s new economic reports from the US (Initial Jobless Claims, GDP data, Durable Goods Orders and the results of stress tests on the biggest US banks), which may bring increased market volatility later in the afternoon. Meanwhile in Europe, UK stock traders are likely to follow the BoE’s rates decision which could impact sterling with a knock-on effect for the large exporting companies on the FTSE-100 Index.
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.