The dollar fell to near one-month lows against a basket of the other major currencies on Friday, as risk appetite was boosted after China’s central bank lifted the fixed rate of the yuan and as the European Central Bank indicated it still had policy options available to bolster growth.
China’s central bank boosted the fixed rate of the yuan following a sharp rally in the euro on Thursday, after ECB President Mario Draghi appeared to indicate that the bank would not cut interest rates deeper into negative territory. The move boosted commodity prices and the commodity linked currencies, sending the dollar broadly lower.
Meanwhile, ECB Governing Council member Erkki Liikanen said Friday the bank has not run out of tools to boost the economy and will continue to support it until it reaches its inflation target of almost 2%.
The remarks came a day after the ECB delivered a stronger-than-expected package of stimulus measures, cutting interest rates across the euro zone to new record lows and ramping up its quantitative easing program.
In the week ahead, investors will be turning their attention to Wednesday’s outcome of the Federal Reserve’s latest policy meeting, with officials widely expected to keep interest rates on hold after hiking in December for the first time in almost a decade; but Central Bank meetings in Japan and Switzerland will also be in focus.
The euro retreated from three-week highs reached in the previous session, as currency traders responded to the aftershocks of the European Central Bank's decision to implement widespread easing measures at a critical meeting in the previous session.
The currency pair traded in a broad range between 1.1080 and 1.1210, before settling down 0.26% on the session.
On Thursday, the euro surged more than 1.6% against the dollar, following hawkish comments from ECB president Mario Draghi, enjoying one of their strongest one-day moves in three months.
Investors now turn their attention to the interest rate decision by the Federal Reserve this Wednesday, following the completion of the Federal Open Market Committee's (FOMC) two-day March meeting.
Pivot: 1.108Support: 1.108 1.103 1.0985Resistance: 1.122 1.1295 1.1375Scenario 1: long positions above 1.1080 with targets @ 1.1220 & 1.1295 in extension.Scenario 2: below 1.1080 look for further downside with 1.1030 & 1.0985 as targets.Comment: the RSI is well directed.
Gold
Gold prices retreated from a fresh 14-month peak on Friday, as a recovery in the U.S. dollar, stronger global equity markets and higher oil prices dented the metal’s safe-haven appeal.
The precious metal slumped $13.40, or 1.05%, to end Friday’s session at $1,259 a troy ounce after hitting an intraday high of $1,287, the most since the 27 of January 2015. For the week, gold prices dipped $1.10, or 0.88%.
Prices of the yellow metal pulled back on Friday as the dollar index recovered around half a percent to end the week at 96.24, after falling to a one-month low of 95.94 in the prior session.
In the week ahead, gold traders will be looking to Wednesday’s Federal Reserve policy, but will also be awaiting monetary policy announcements from the Bank of Japan, the Bank of England and the Swiss National Bank.
Pivot: 1261Support: 1245 1242 1237Resistance: 1261 1269 1279Scenario 1: short positions below 1261 with targets @ 1245 & 1242 in extension.Scenario 2: above 1261 look for further upside with 1269 & 1279 as targets.Comment: as long as 1261 is resistance, look for choppy price action with a bearish bias.
WTI Oil
Oil futures rallied to fresh three-month highs on Friday, after the International Energy Agency provided indications that the prolonged rout in oil may have hit a bottom as low prices were beginning to impact production outside of OPEC. In a monthly forecast, the Paris-based IEA said that non-OPEC output would decline by 750,000 barrels per day in 2016, compared to a previous estimate of 600,000 bpd. U.S. production alone would decline by 530,000 bpd this year.
Crude oil for delivery in April surged to an intraday peak of $39.02 a barrel, the most since December 7, before closing up 66 cents, or 1.74%.
Oilfield services provider Baker Hughes said late Friday that the number of rigs drilling for oil in the U.S. decreased by six last week to 386, the 12th straight weekly decline and the lowest level since 2009. There are now nearly 76% fewer rigs of all kinds from a peak of 1,609 in October 2014. A lower U.S. rig count is usually a bullish sign for oil as it signals potentially lower production in the future.
In the week ahead, oil traders will be focusing on U.S. stockpile data on Tuesday and Wednesday for further evidence of a slowdown in production. Developments surrounding a potential deal between OPEC and non-OPEC producers to cap output will also be in focus.
Pivot: 37.2Support: 37.2 36.55 36.05Resistance: 39.35 40.4 41Scenario 1: long positions above 37.20 with targets @ 39.35 & 40.40 in extension.Scenario 2: below 37.20 look for further downside with 36.55 & 36.05 as targets.Comment: even though a continuation of the consolidation cannot be ruled out, its extent should be limited.
US 500
U.S. stocks rose broadly on Friday, closing higher for their fourth consecutive week, as crude soared to its highest level on the calendar year and investors felt the ripple effects from the European Central Bank's decision to implement a wide range of easing measures in order to stimulate growth throughout the zone.
The Dow Jones Industrial Average surged 1.28%, closing at near session-highs; the NASDAQ Composite index gained 1.85%; while the S&P 500 Composite index added 1.64%. On the S&P 500, all 10 sectors closed in the green, as stocks in the Energy, Financials and Health Care industries led. In total, seven sectors closed at least 1% or higher in Friday's session. For the week, the S&P 500 rose by more than 1%.
Investors now turn their attention to the interest rate decision by the Federal Reserve this Wednesday, following the completion of the Federal Open Market Committee's (FOMC) two-day March meeting.
Pivot: 1930 Support: 1930 1890 1810 Resistance: 2043 2080 2115 Scenario 1: long positions above 1930 with targets @ 2043 & 2080 in extension. Scenario 2: below 1930 look for further downside with 1890 & 1810 as targets. Comment: the RSI is bullish and calls for further upside. Prices have confirmed a double-bottom pattern. The 20-day simple moving average has turned up and now plays a support role.