Markets Overview
The FOMC rate decision and the press conference didn’t have any surprises in store for us. The rates stayed the same (no one expected any changes) and the same can be said about Fed’s message. The inflation can move considerably above the former 2% targe level but the Fed considers the move to be transitory and due to base effects. The central bank believes that only real inflation can come from income growth. USD Index lost some ground after the FOMC and is now trading fairly close to the rising trendline support. By reading further you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.

Treasury yields moved lower from the session highs after the FOMC statement was released. The 10-yr Treasury yield closed unchanged at 1.62%, and the 2-yr yield at 0.17%. The USD Index (DXA) slid 0.4% to 90.58. EURUSD is up by 0.47% and XAUUSD rallied 0.67% since the FOMC press conference at 6 pm GMT. The US equity indices didn’t react much with S&P 500 closing almost unchanged (-0.08%) and Nasdaq and DJIA closing down 0.28% and 0.48% respectively. 

Upside momentum in bitcoin was lost at a zone we identified here and the market created a bearish loss of momentum candle. This indicates that some significant market operators were focusing on the same zone and paired down their risk perhaps fearing that the recent increase in downside volatility in bitcoin might not be over. 

Crude oil inventories came in at +100k barrels while analysts had expected to see a decrease of 900k barrels. USOIL, however, continued rallying on the back of the bullish predictions made by Goldman Sachs and reached the nearest confluence zone we focused on in the Bullish & Bearish Markets video. USOIL reacted lower from our zone but still managed to close higher by 0.80%. With the price of crude moving higher and the Canadian retail sales numbers coming in at high levels the USDCAD pair stayed soft. This was in line with our analysis (see the video). 

Analysis Reminder
We reported this only yesterday, but as the predictions by these big banks are so significant and the oil market really took note of them it is worth reminding our readers about this. Goldman Sachs and Bank of America, point to the increasing demand for oil which is likely to also support commodity currencies. Goldman expects the price of oil to reach $80 on increasing demand and sees commodities rallying about 13% over the next six months. Highly correlated AUDUSD is likely to rise with the price of oil. Yesterday’s move higher from the 50-day SMA to our resistance level at 0.7816 was 1.14%. USOIL has now rallied 4.49% from the support zone we identified on April 22nd (here). Today traders focus on the US GDP and inflation numbers (PCE deflator) that are released together with the GDP numbers. Analysts expectation for the PCE deflator is 2.4% (1.3% in the prior quarter).

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Market News & Facts

  • Australian first-quarter export prices up by 11.2%
  • Biden in his speech: We are in competition with China
  • Apple reports EPS $1.40 (vs. $0.99 expected). Revenues exceed estimates ($89.58 Bn vs. $77.30 Bn).
  • Germany reports almost 25k new coronavirus cases
  • Covid deaths in India exceed 200k, hospitals overwhelmed
  • Australia and the UK are expected to sign a free trade agreement in June
  • AUD CPI numbers come in below expectations.
  • No change in policy or asset purchases expected from the Fed.
  • Big consumer confidence surprise (121.7 vs. 113.1 expected) in the US
  • Treasury yields moved higher supporting USD and pressuring tech stocks.
  • The 10-yr yield increased 0.05% to 1.62%
  • US housing prices moving higher support the sentiment.
  • Vaccination rate very ‘healthy’ in the US but lags elsewhere.
  • India suffering from high rates of infections and deaths
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The Next Main Risk Events

  • USD Gross Domestic Growth
  • USD Unemployment Claims
  • USD Pending Home Sales
  • CNY Manufacturing PMI
  • EUR German GDP
  • CAD Canadian GDP

For more information see the TIOmarkets economic calendar here.

Trade Safe!

Janne Muta
Chief Market Analyst
TIOmarkets.com

By reading further you agree with our disclaimer at the bottom of this page and acknowledge that we do not provide investment advice.

TIOmarkets offers exclusively consultancy-free service. The views expressed in this blog are our opinions only and made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions.

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All the prices in this report are CFD prices based on price charts provided by TIOmarkets unless otherwise stated.

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