Investor sentiment remains a touch softer after some profit taking in stock markets, with most equities trading lower. But the standout exception, once again is the Nasdaq 100 which closed at all-time highs last night. With Amazon, Apple and Microsoft leading the way in the first hour of trading, ‘plus ca change’ some might say as the technology index powers past the 10,000 mark.
Currencies have undeniably pushed to extremely stretched levels, both in positioning and valuation. This is true on a slew of technical measures as well, with a number of indicators oversold on the big USD. However, for the time being this is not helping the greenback, as sellers have continued today ahead of tonight’s FOMC.
The tail risk, albeit small tail, is that the Fed does not confirm its dovish stance tonight, especially after last week's strong non-farm payroll number. However, it is probably is too early for Chair Powell to ‘upset the Apple cart’ and dare signal any change from this stance and change its forward guidance. Ample liquidity and suppressed bond yields is a very hefty cocktail mix that likely underpins risk assets in the near-term at least.
GBP/USD up and up again
Cable is gaining for a tenth straight day, its longest winning streak since April 2012.
The series of higher highs and lows continues apace with the pair closing positively above its 200d MA at 1.2687. However, momentum indicators like the RSI are now signalling we are in overbought territory for the first time since mid-December. The mood in the options markets are also more subdued.
EUR/USD grinds higher and higher
Spot is bid and there is much hope that a decision or guidance on yield curve control by the Fed could underpin the current uptrend.
Healthy consolidation over the last few sessions has interrupted the single currency’s streak, although today’s move higher marks the twelfth day in thirteen. Resistance is now at the psychological 1.14 level ahead of the June 2019 high at 1.1412. EUR should stay well supported above 1.13.
USD/CAD holding above recent lows
CAD has continued to lag AUD and NZD, its fellow commodity currencies, struggling for more gains on softer Oil and overall weakness in USD.
The pair dipped overnight below 1.34 and is consolidating its recent losses. The underlying trend lower points to a test of retracement support at 1.3355, although again the dollar sell-off looks overdone on various indicators.
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