The US Dollar regained ground following higher than expected inflation figures for April:
Those figures are pushing the narrative that the US economy is close to overheating and that the Federal Reserve will be forced to tighten its monetary policy sooner than expected. The central bank is doing its best to reassure markets that the uptick in inflation is only a temporary effect, but investors remain skeptical.
The US Dollar is likely to outperform low-yielding currencies in the near-term, with the Japanese Yen being one of them. USD/JPY broke above the falling trendline resistance from the March high, and is approaching the 61.8% Fibonacci level of the April decline. A clear break above this level would pave the way for a continuation of the recovery rally to at least 110.20, and possibly 111.
EUR/USD has been in a steady uptrend since the beginning of April, but resistance ahead of the 1.22 level has been strong. The currency pair saw a sell-off on Wednesday, and is approaching the rising trendline from the late March low, where support can be expected. Euro bulls need the support zone at 1.1985-1.20 to hold, as a breakout below the former level could spell trouble. The next notable support level would lie at 1.1875.
Gold is looking more and more attractive as inflation concerns are mounting. However, with the US Dollar again on the rise and investors risk averse, the Gold cross pairs might get more attention in the short-term, rather than XAU/USD.
The Australian Dollar has come under renewed pressure recently, as the strong Dollar and risk aversion are weighing on the currency. XAU/AUD broke above a key resistance level at A$2341, and this might pave the way for rally towards A$2450. The Daily RSI is not in overbought territory, signaling that there might be more room to the upside.
While technology stocks keep dragging the US indices lower, European markets have fared better today, as they have a heavier concentration of value rather than growth stocks. The GER30 managed to bounce off the psychologically important 15,000 level. The broader uptrend remains intact, and investors still seem keen to buy any larger dip, despite the stock market´s wild mood swings.
15,225 and 15,290 are the next two major resistance levels to keep an eye on, as a breakout above the latter may signal a recovery rally towards 15,500 points. To the downside, imminent support is seen at 15,000 points, followed by 14,830 points.
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Today’s key charts focus on oil, where the recent rally has stalled amidst talk of a lift in sanctions and speculation of a production boost.