The new trading week begun mixed as stock indexes were mostly looking down while crude prices were edging higher, and the U.S. Dollar index rolled back to 89.85 points weakening to currencies of G7 countries and strengthening to the Chinese Yuan.
The chaotic dynamics of markets came probably because of the Memorial Day in the United States and a Bank Holiday in the United Kingdom that wiped out most of the liquidity from markets. Crude market dynamic was amplified by OPEC’s Joint Ministerial Monitoring Committee on Monday that skipped any recommendations on production levels until a clear vision of the U.S.-Iran nuclear deal progress. However, absence of a clear decision on further crude production increase after July supported crude prices.
The Greenback is suffering from high inflation readings ahead of the NonFarm Payrolls data that would be released this Friday. Federal Reserve Chairman Jerome Powell is also expected to speak At the Green Swan 2021 Global Virtual Conference together with the President European Central Bank Christine Lagarde. High inflation topic is on the list for both the Fed and ECB. However, the inflation in the U.S. has already overshoot annual target, and is more critical for the American monetary policymaker. In this regard we may expect Mr Powel to speak about possible tapering timeframe of the stimulus bond purchases. Investors would be certainly wait for this Friday before making any strategic decisions on further Greenback movements.
Those expectations may explain the difference in the dynamics of the Greenback to the currencies of G7 countries and to the Chinese Yuan. Strengthening of the Yuan is also supported by the decision if the People's Bank of China to raise FX reserve requirement ratio for financial institutions to 7% from 5%, from June 15.
Stock market in the United States is still on the crossroads. On the one hand, the Federal Reserve supports it preventing from falling down. On the other hand, there is no fuel for the market to rise on as all possible triggers are already discounted in the price. So, it is not clear what investors should do in this situation. NonFarm Payrolls data together with Jerome Powel's testimony may give the answer at the end of this week.
Technical picture for the S&P 500 broad market index became less pessimistic with the support level at 4120 points. It would be very difficult to fall significantly below this landmark. As for the further upside movements the closes resistance is at 4255 points, but it is really hard to imagine any reasons for the index to reach this mark.
Brent crude prices gaining extra support amid OPEC+ decision not to review any crude production increase before the situation with U.S.-Iran nuclear deal would be clearer. Prices may rise to $72.60 a barrel after reaching $70.00 a barrel. If they fail to hold on to this level they might roll back to $68.75 triggering a downward scenario with targets at $67.40 a barrel and $66.30 a barrel of Brent crude.
Gold prices are also waiting for NonFarm Payrolls data. So, yellow metal prices may remain in the vicinity of $1900 an ounce landmark until Friday.
Technical picture on the FX market changed only for the Cable, where a break thought of 1.42500 may push GDPUSD to 1.43600, where sell positions to 1.40900 would be extremely attractive.
The EURUSD is still trading not far from the important support level at 1.21850. If the pair makes it to the 1.23000 sell positions with the target at 1.21850 might interesting to open.
The USDJPY is testing the support level at 109.30. Technical picture suggests buy positions from this level could be interesting with a target at 110.60. If this level would be reached sell positions would be again preferable.