Market Analysis

The dollar is carrying the weakness of the previous session

FOREX

The dollar is carrying the weakness of the previous session into early Wednesday trading, following Jerome Powell’s testimony to the US Congress on Tuesday. Powell’s message was dovish in tone, reaffirming the central bank’s intention to keep the stimulus in place until the recovery reaches a more advanced stage. Since last week’s pivot to a more hawkish stance, which surprised investors and offered support to the dollar, several Fed officials have spoken in public and used the opportunity to soften the shock of the previous week. The Fed is now playing a balancing game, working to take the edge off its last policy statement, with the tone of these public interventions creating some headwinds for the dollar.

Ricardo Evangelista – Senior analyst, ActivTrades

 

OIL

Oil markets continued to edge higher on Wednesday, boosted by the US Dollar falling once again and correcting its short-term bullish trend started last week. The barrel of light crude oil is now challenging its immediate resistance at $73.20, the last one before the major resistance between $73.90 and $74. As well as the dollar’s correction, this week’s market sentiment is also being boosted by expectations of rising demand for energy and mining as travel and leisure restrictions are lifted in many areas. However, most oil traders are also paying attention to the ongoing talks with Iran where an agreement with another superpower could quickly lead to a flood in global supply and seriously dent the current rally. Investors will also keep an eye on today’s US Crude Oil Inventories where a significant increase is widely expected.

Pierre Veyret– Technical analyst, ActivTrades

 

EUROPEAN SHARES 

European shares opened mixed on Wednesday, following the trend from Asia overnight, as investors are still digesting Jerome Powell’s speech yesterday. The Fed chairman managed to reassure the market about the transitory effect of rising prices in the US economy following last week’s hawkish shift. The longer-term outlook of tightening monetary policies is being increasingly accepted by investors with many still expecting the Fed to remain dovish for some time with stimulus measures also remaining in place. That said, the short-term outlook is likely to remain bullish for stocks, for a couple weeks or months at least, before a switch from riskier assets to safer havens takes place.

Pierre Veyret– Technical analyst, ActivTrades

 

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