The dollar is bouncing near a yearly low on the back of increasingly optimistic comments from Federal Reserve officials.
dollar
The dollar is trading in the middle of the week after finding some important support around the yearly low at 100.50. The factors driving this buying pressure in a psychologically significant area can primarily be attributed to hawkish comments made by several concerned members of the Fed. The outlook of these members appears to maintain expectations that inflation has eased, but not by a large enough amount to warrant a pivot so far. On the contrary, there seems to be a growing consensus that there is scope for further rate hikes and that they will be held at these levels long enough for inflation to be contained.
In addition, better-than-expected economic data from the world’s second-largest economy (China) eased severe concerns about the global economic slowdown and led to the dollar struggling to attract investors looking for safe-haven assets. This resulted in a slight correction in the USD yesterday. However, it is still trading above a large buy zone and continues to be supported by the Fed’s long-term dynamics.
Technical Analysis (D1)
Regarding the market structure, the current price action has formed a possible reversal pattern in the form of a downward channel. The pattern was partially validated as an impulsive breakout of the structure moving to the upside as the bulls dominated the story ahead of the ensuing corrective wave. From now on, the price can remain bullish if buyers can defend the potential bearish channel continuation pattern that is currently forming. Conversely, if sellers break through the support level around it 100.50the narrative could turn towards the bears and break below the year low.
euro
The single European currency is heading into the middle of the week under slight pressure as it loses some control over the recent developments. The factors driving this lack of enthusiasm from buyers can be linked mainly to the dollar’s dynamics as well as the divergence between the Federal Reserve and the European Central Bank regarding interest rate hikes. In a week devoid of major economic data along with the European Monetary Union’s final inflation rate, EURUSD was largely affected by hawkish comments from Federal Reserve officials as well as European Central Bank officials, who are inclined for monetary policy to be tighter and for a longer period than It was expected. in the beginning. As it stands, both central banks are expected to raise interest rates by 0.25% in May.
Technical Analysis (D1)
In terms of market structure, the current price has approached an area with sideways selling pressure in the form of an ascending channel. This pattern gives the speculators the potential to drive the price if the current continuation pattern plays out successfully, confirming the potential for a larger double top reversal pattern to form. Conversely, if the bulls can maintain pressure, the price may break above the level and continue to the upside if it negates the resistance area in an impulse wave.
fairy
The pound is heading towards the middle of the week, recording 3Research and development Daily high in many trading days. The factors driving this exuberance can be linked to the upbeat UK inflation data which came in at 10.1% yoy in March vs. 9.8% expected, and core CPI came in at 6.2% yoy compared to forecasts of 6.0%. This data, along with the previous days employment figures, caused optimism about the Bank of England’s rate hike cycle to continue and accelerate. Looking ahead, the pound sterling is likely to be affected by the dynamics of the dollar and any ephemeral comments from central bank officials.
Technical Analysis (D1)
In terms of market structure, the bulls were in control of the narrative and the price tested the key 1,244 The level has since declined, forming a possible bearish double top. As the price retests this peak formation again, two scenarios present themselves. Namely, if the sellers defend the area in the current bullish channel continuation pattern, this could validate the potential reversal pattern. Conversely, if buyers break above the area, the price will continue to move upwards in the near term.
gold
Gold is heading into the middle of the week under some pressure on its way to retesting the weekly low around $1,989. The factors driving this lower appetite from the yellow metal buyers can be attributed to several factors driving the risk profile in the market this week.
- The geopolitics surrounding the United States v. China with respect to Taiwan
- Geopolitics surrounded fears of Russian hackers targeting Western infrastructure
- Fears of a US debt default, due to Joe Biden’s reluctance to raise debt limits.
- The hawkish comments held by Fed officials boost the possibility of a 25 basis point rate hike in May.
All of the aforementioned factors led to a strong risk isolation in the global market driving buyers into the dollar as investors seek safer assets at the expense of the yellow metal.
Technical Analysis (D1)
In terms of market structure, price action has been mostly bullish, with higher highs and higher lows being printed. The current price action is approaching the February 2022 high in a corrective wave associated with a possible ascending channel reversal pattern. From now on, price action should be given a chance to print itself to either validate the reversal pattern or to nullify it by continuing to rise impulsively towards the aforementioned peak.
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Ofentse Waisi
Financial market analyst
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