In this article, we have covered the highlights of global market news about the Dollar and Stocks, Gold, Oil and Commodities.
The increased bid in bonds (lower rates) is likely the most important news of the day thus far, with Treasury yields falling ahead of European trade. This has placed a significant pressure on yen pairings, with USD/JPY down 0.4 percent to 112.75. The loss in Yen pairings jumps out the most so far today. In the wider picture, it can be argued that this might play out as a great correction to buy back into – especially for the likes of CAD/JPY and NZD/JPY.
Dollar and Stocks
The dollar is still weak as the push and pull continues. With US consumer inflation data due tomorrow are among the important risk events to watch out for this week. The bond market is still attempting to work itself out. The 10-year Treasury rates have fallen back to their 200-day moving average. Risk is also leaning more towards the cautious side. Although this is after a strong run of gains for US indexes in particular.
The S&P 500 index has now closed higher for eight straight days. Its the longest stretch for the index since 1997. Returning to USD/JPY, the dip has brought the 38.2 retracement level of the September to October swing move upward @ 112.56 into focus. However, given the technical breakdown, a push towards the 50.0 retracement level at 111.90 and 112.00 becomes feasible.
Outside of forex, gold is becoming more attractive. The alignment of technicals and seasonal trends in favour of gold will be one to monitor in December. Because of the Fed’s recent dovish approach, the recent increase in US bond rates may reverse. As inflationary pressures stay unchanged, real yields should decline as well. This is what has boosted gold after the Fed’s interest rate decision.
As long as inflation continues to rise/be elevated, and the Fed remains patient in raising rates, gold will be supported. Physical demand for gold often increases around the end of December. As a result, the end of December is frequently the greatest time to buy gold from a seasonal standpoint.
Oil and Commodities
Oil is also holding steady. The purchasers aren’t certain that the next step higher is imminent. Meanwhile, commodity currencies are looking more lukewarm heading into the session. Commodities are remaining little changed versus the dollar but falling slightly against other key currencies. In Germany, overall trade conditions have returned to pre-epidemic levels. There is still some catching up to do in order to meet more robust/pent-up demand circumstances as the economy recovers from the pandemic.