Currencies
EUR/USD – moved down due to the improved sentiment in the USD and the rising expectation that we might see a higher interest rate after all in the US. We will be waiting to see what the inflation data will show out of the Eurozone, which could be better than expected due to the higher oil prices. However, the FOMC minutes will be what most people will be looking at.
USD/JPY – the resistance proved once more to hold, but we are seeing another attempt this morning. The Japanese GDP came in better than expected, which should have caused the JPY to strengthen, this didn’t happen. The reason for this is twofold. The expectation of a June rate hike by the FED have increased after the strong data out of the US yesterday, and also the Japanese GDP data was better than expected, but the previous data was revised down, but the main focus is on the USD. In addition there is still the expectation that the BOJ will expand stimulus to boost the economy further.
GBP/USD – stopped in its tracks yesterday at the resistance before moving down after weak data out of the UK, and taking a further leg down after the stronger data out of the US which also changed sentiment on the USD.
Indices
Dollar Index – with the stronger data and with it the increased expectations of a rate hike in June, we can see the Dollar Index breaking through the resistance at the 94.570 level. We still have to be careful with the FOMC minutes later today.
S&P 500 – dropped sharply yesterday as the likelihood of a further rate hike strengthened the USD, and weakened equities, but the main reason was a report that George Soros has sold a lot of stocks as he is pessimistic. We can see that the support is still holding, although it is under a lot of pressure.
Commodities
Gold – moved below the upwards trend line as the USD is gaining in strength. If the FOMC minutes are not too dovish, we are likely to see the improved sentiment in the USD continue and gold move further down.
Oil – moved to the resistance, but was not able to break through this level for now. We saw a slightly smaller drop in crude stock, and we will be waiting to see what the inventories will show this afternoon. We are expecting a drawdown of just over 2.8 million barrels and if this is larger, we could see a break of the resistance, especially if the production also keeps declining.