US stocks gain momentum as inflation fears subside
US stocks rose on Monday thanks to tech companies. The Nasdaq 100 index rose 190 points while the Dow Jones and S&P 500 indexes rose 1% and 0.5% respectively. Market participants pay attention to recent economic data to determine whether the recent trend in inflation is temporary or part of a long-term trend. At the start of this month, data showed that consumer and producer prices rose 4.2% and 6.2% respectively. However, the prices of some commodities like iron ore and copper fell as China pledged to crack down on speculation. As such, inflationary pressures have eased, as investors expect the situation to be transitory. Higher inflation and a tightening labor market are conducive environments for high interest rates. In addition, investors are waiting for a global tax deal between the G7 countries.
Cryptocurrencies continued to rally overnight as investors rushed to buy lows after last week’s crash. The total market capitalization of all cryptocurrencies tracked by CoinMarketCap has increased by 17% in the past 24 hours. Bitcoin rose 10% to $ 38,423 while Ethereum and Binance Coin rose more than 25% to $ 2,610 and $ 345, respectively. Yet these currencies are significantly lower than they were at the start of the month. Some analysts believe they will eventually bounce back and test their recent highs again, while others believe this rebound will be a temporary rescue rally.
Today’s economic calendar will be relatively low-key. In Europe, the German statistics agency will release the second reading of the country’s first quarter GDP data. Economists expect the numbers to show the economy shrank 1.7% in the first quarter, causing a 3.3% year-over-year contraction. This performance will be mainly due to the lockdowns put in place by the German economy and the disruptions induced by Brexit. The Ifo Institute will also release the latest business valuation data as EU leaders continue a summit that started yesterday. In the United States, the statistical agency will release the latest house price index and new house sales figures. The American Petroleum Institute (API) will release the latest inventory figures.
EUR / USD
EUR / USD rose during the overnight session as the US dollar came under pressure. It hit a high of 1.2225, which is significantly higher than Friday’s low of 1.2160. On the four-hour chart, the price is slightly below this month’s high of 1.2242. It is also below the upper face of the ascending channel as the Relative Strength Index (RSI) has risen to 60. As a result, the pair may have a short term bullish breakout. If that happens, the next target will be the psychological level of 1.2300.
NZD / USD
NZD / USD is holding at 0.7218 ahead of the RBNZ interest rate decision. On the three-hour chart, the pair is slightly above the 25- and 15-day moving average. It is above the important support at 0.7115 which was the lowest level last week as the histogram and MACD signal line moved above the neutral line. However, the pair has also formed a head and shoulders pattern, which tends to be a bearish signal. Therefore, the pair may break lower after the RBNZ decision.
USD / CHF
The USD / CHF pair has been under pressure in recent weeks. It fell from 0.9474 on April 1 to 0.8963 today, the lowest since February. The pair is below the parabolic SAR points and on the upper side of the descending channel. It also fell below the shorter and longer moving averages. Therefore, the downtrend will remain if it is below these averages.