The US dollar retreated from multi-month highs, following yesterday’s publication of the minutes for the latest Federal Reserve FOMC meeting. The notes revealed the already well-publicised worries about inflation, but also showed that officials remain patient and unwilling to use tightening as a pre-emptive tool, with decision making remaining data dependent. The main takeaway from this meeting was a certain lack of urgency displayed by the bank’s officials, which ended up weighing on the dollar. Later today, the European Central Bank will release its strategic review, with observers expecting a change to the way inflation is calculated, which could start including house prices, a move that could push CPI numbers up in the eurozone; if confirmed, such change will be positive for the euro and could support more gains for the single currency versus the dollar.
Oil markets traded lower on Thursday, mirroring the global trend as investors lack short to mid-term clarity. Traders desperately need further clues on where production levels are heading following the breakdown in talks inside the OPEC+ alliance. As uncertainty grows, traders prefer to reduce their exposure to oil and turn to safe havens like precious metals and bond markets. Technically, the situation is worrying for light crude as the price is now challenging $70.70 (38.2% Fibonacci) following yesterday’s fall through the short-term bullish channel. The next support level can be found over the 50% Fibonacci ratio at $68.95.
European shares drifted lower on Thursday as uncertainty continues to grow and dent the risk-on trading stance. Investors are still weighing the prospect of tapering talks, especially after the last FOMC minutes indicated “conditions could be met sooner than expected”. Most stock traders are readying themselves for a much less clear environment, and potentially the start of a new market cycle, as the tapering of the $120 billion bond buying program would represent a strong bearish driver for risk assets. That said, on the old continent the ECB has tried to reassure investors by setting its inflation goal at 2% to keep stimulus policies in place for longer. This effort seems to be vain so far as bear traders remain in control of European benchmarks this morning. The Stoxx-50 Index is now back at 4,000pts following a pull-back confirming Tuesday’s break-out of the mid-term bullish channel, which opens the way to the support at 3,860pts.
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.