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MTrading Team • 2024-03-21

EURUSD jumps to weekly high above 1.0900 as Fed drowns US Dollar, PMIs eyed

EURUSD jumps to weekly high above 1.0900 as Fed drowns US Dollar, PMIs eyed

Cautious optimism prevailed in the market early Thursday as traders made peace with the Fed’s hesitance in welcoming the rate cuts. That said, FOMC Chairman Powell’s speech also failed to defend the policy hawks and hence drowned the otherwise strong US Dollar, which in turn propelled the commodities and Antipodeans.

While the US Dollar Index (DXY) dropped to the week’s low, the Treasury bond yields also reversed the previous rebound and allowed the Gold price to refresh the all-time high. However, the crude oil failed to cheer the Greenback’s weakness amid demand concerns.

EURUSD marked the biggest daily gain in a month after reversing from the 200-SMA, edging higher of late. Further, GBPUSD also remains firmer following the biggest daily gain in a fortnight. Moving on, USDJPY snaps a seven-day uptrend while reversing from a five-month high whereas AUDUSD and NZDUSD remain firmer for the second consecutive day.

Elsewhere, BTCUSD and ETHUSD struggle to defend the previous day’s corrective bounce as crypto traders fear more regulatory tensions between the industry players and the US SEC. However, the optimism surrounding spot ETF approvals and the latest fund flows suggest further upside for Bitcoin and Ethereum moving forward.

Following are the latest moves of the key assets:

  • Brent oil prints mild gains around $86.50 after snapping five-day uptrend the previous day.
  • Gold price remains firmer at the highest level on record, despite recently retreating from $2,222 to $2,205.
  • USD Index consolidates the previous day’s losses with minor gains around 103.30.
  • Wall Street closed with mild gains and the Asia-Pacific stocks also edged higher. Further, the shares in Europe and the UK also remain upbeat during the initial hour.
  • BTCUSD and ETHUSD reverse the previous day’s corrective bounce around $67,000 and $3,520 at the latest.
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US Dollar fails to cheer Fed’s hawkish tone…

The Federal Reserve (Fed) matched wide market expectations and left the monetary policy unchanged while pushing back the odds of witnessing rate cuts before mid-2024. Also, the FOMC kept the dot plot intact, suggesting three rate cuts in the year as shown in December. However, the tone of Chairman Jerome Powell appears slightly unconvincing to the policy hawks as he fails to welcome the latest inflation and employment signs as favoring the delay in the rate cuts. The same drowned the US Dollar, yields and propelled the major currencies versus the Greenback, as well as the commodities.

It’s worth noting that while the Fed’s dovish halt weighed on the US Dollar the European Central Bank (ECB) President Christine Lagarde pushed back rate cut expectations to late 2024 and added strength to the EURUSD upside. Meanwhile, downbeat UK inflation data failed to tame the GBPUSD upside as the actual figures were better than the previous readings and the US Dollar dropped after the Fed.

Meanwhile, Bank of Japan (BoJ) Governor Kazuo Ueda pushes back hawkish bias about the Japanese central bank after lifting the interest rates for the first time in 17 years. The same joined downbeat Japan data to challenge the USDJPY sellers.

Moreover, unimpressive improvements in the Australian and New Zealand data challenge the AUDUSD and NZDUSD buyers, especially when the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) struggle to defend their previous hawkish bias.

On a different page, fears of witnessing softer Oil demand, due to the higher rates for longer, join the hopes of experiencing higher energy supplies to weigh on the Crude oil prices even as the weekly US inventories marked heavy drawdown.

It should be noted that the optimism about cryptocurrencies fades amid regulatory battles between the industry players and the US Securities and Exchange Commission (SEC). On the same line could be the long liquidations of the major players at the multi-year highs.

  • Strong buy: USDCAD, USDJPY
  • Strong sell: Crude Oil, US Dollar, GBPUSD
  • Buy: BTCUSD, ETHUSD, Nasdaq, Gold

All eyes on the PMIs and BoE…

Having witnessed the market’s unanticipated reaction to the Fed’s moves, traders will closely observe the first readings of March PMIs for the top-tier economies for clear directions. Also important to watch will be the Bank of England’s (BoE) monetary policy announcements even if the UK central bank isn’t expected to alter the current measures. That said, firmer US PMIs and regional activity data will help the US Dollar to portray a corrective bounce and challenge the latest rebound of the EURUSD and other major currencies versus the Greenback. However, the Gold is less likely to return to the bear’s radar amid the traders’ broader peace with the Fed’s June rate cut and clearance of the key technical hurdle.

May the trading luck be with you!