The US dollar surged to its strongest level since March 2020 on Tuesday as geopolitical and inflation concerns boosted its safe-haven appeal. The dollar index hit the 101 level on Tuesday morning. The currency pair received Additional buying pressure after the bullish comments from the Fed. James Bullard. The biggest driver for the greenback this week is the latest US housing data and Fed Chairman Powell's speech on Thursday.
US futures remain under pressure on Tuesday morning following the hawkish comments from the Federal Reserve Bank of St. Louis President James Bullard. Bullard said there may be an interest rate hike of 75 basis points if needed. He said the Fed needs to act quickly to raise interest rates by more than half a percentage point to around 3.5% this year.
Crude oil futures hold the previous weekly gains. The overall momentum remains bullish in the last 4 days after China has started to eradicate lockdown restrictions in Shanghai. On the other hand, Libya shut down its largest oil field amid protests against Libyan Prime Minister Abdul Hamid Dbeibah.
In the currency market, the Japanese yen plunged to a 20-year low against the King Dollar. At the time of writing, the USDJPY is trading above $128. Meanwhile, the EURUSD slightly recovered from the early session lows while the British pound struggled to find upside momentum against the US dollar.
The precious metal retreats back to near the $1970 area on Tuesday morning after the buyers failed to break above the psychological resistance area of $2000. During the previous session, the gold price soared to a five-week high and touched almost $2000 an ounce.
On the data front, the Reserve Bank of Australia released the minutes of its April board meeting. The minutes said the central bank expected a further increase in inflation, with measures of underlying inflation in the March quarter expected to be above three per cent.
“These developments have brought forward the likely timing of the first increase in interest rates,” RBA minutes said.
Moving ahead today, the important events to watch:
US – Building permits: GMT – 12.30
US – Housing starts: GMT – 12.30
Worldwide, more than 503 million people have been confirmed infected and more than 6.19 million have died. The United States has confirmed over 80 million cases and has had more than 988,000 deaths from COVID-19, the highest total in the world.
Technical Outlook and Review
EURUSD: The currency pair rebounded back to above 1.0800 during the European session. For today, the first resistance is located for the pair at around 1.0835, a break above this level will confirm a possible move to 1.0870/90.
The important levels to watch for today: Support- 1.0760 and 1.0730 Resistance- 1.0835 and 1.0870.
GOLD: For today, $1965 is the key support area to watch, any break below this level will open $1950/45 minimum. On the flip side, the bullish breakout of $2000 is likely to push the metal into a new trading zone, which may offer further buying opportunities until $2020/50.
The important levels to watch for today: Support- 1965 and 1950 Resistance- 1990 and 2000.
Quote of the day - "When I get together with other traders and they start exchanging war stories about different trades, I have nothing to say. To me, all our trades are the same." ― Larry Hite.
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