Wall Street equity indices paused their record rally on Tuesday, with Dow Jones and the S&P 500 retreating modestly from all-time highs amid thin trading volume. There appeared to be lack of fresh catalysts overnight to fuel further gains after Monday’s rally, allowing stocks to consolidate. News crossed the wires that California is ready to fully remove the Covid-related restrictions on June 15th. This helped boost sentiment in the consumer sector, while the information technology sector was a clear lagger.
The IMF revised up this year’s global GDP forecast to 6.0% from an earlier estimate of 5.5%, saying that “even with high uncertainty about the path of the pandemic, a way out of this crisis is increasingly visible”. The agency has also upgraded growth forecasts for the US to 6.4% this year, driven by President Joe Biden’s fiscal stimulus bill as well as a rapid rollout of Covid vaccines.
The S&P 500 indexextended higher towards the ceiling of the “Ascending Channel”, which may serve as an immediate resistance level. The index has broken a psychological resistance level at 4,000, opening the door for further upside potential with an eye on 4,125. The overall trend remains bullish-biased as suggested by the upward-sloped moving averages. The MACD indicator is trending higher above the neutral midpoint, suggesting that bulls are still in control.
Crude oil prices rebounded slightly during Tuesday’s APAC session as traders shrugged off fears about rising Iranian crude oil exports ahead of a nuclear talk held in Vienna. The meeting aims to bring both Iran and the US back to the 2015 nuclear accord.
The chances of a deal to be struck any time soon appear thin, the start of talks ignited hopes for a potential return of Iranian oil to the global market. Iranian crude oil exports have declined sharply since the US tightened sanctions in 2018, falling from over 2.2 million bpd to 0.192 million bpd recently . Full restoration of Iran’s output may add over 2 million bpd to global supply.
The Energy Information Administration (EIA) will report weekly inventories data on April 7th, with market participants forecasting a 2-million-barrel decline in stockpiles. Recently, refiners are speeding up operations after extreme cold weather swept the country in February, gradually thawing inventories built during the cold blast.
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Month and quarter end rebalancing flows passed by without causing too much volatility, nonetheless it did provide AUD/USD with a modest bid. However, gains were short-lived with the pair back below 0.76 and softer than expected trade data prompting a break below the YTD (0.7562). Having posted fresh 2021 lows the close will be important, in which a close below 0.7562 opens the door towards the 0.7500 handle. On the topside, any recoveries are likely to be capped by the 100DMA situated at 0.7632.
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The US Dollar Index (DXY) has been making good headway in recent trade, with room to run higher yet before possibly running into problems. Looking ahead to resistance, there is a major zone that lies around the 94.30/95 vicinity.
The resistance zone comes by way of peaks created back in September and November. This area of resistance was once support in March of last year as the dollar bottomed and spiked on corona fears.
At this time there isn’t anything visible to the left, price-wise, to keep resistance from getting tested, but that doesn’t mean there won’t be bumps along the way if it is to be the case. Looking immediately lower, there is a trend-line from late February that could help keep the trend powering higher.
If the trend-line is broken, then will be looking to the March 9 peak and 200-day at 92.43 as an additional source of support. It is ideal, though, if the trend-line holds to keep price moving higher in a more orderly fashion.
For now, fresh longs don’t hold a good deal of appeal from a risk/reward perspective without some support to lean against. Existing longs may want to keep an eye on the aforementioned support levels. Shorts may be best served being patient until further price action provides better clarity for the downside.
Silver investors may get a big driver this week in the form of US President Biden’s infrastructure-focused stimulus announcement. Mr. Biden will outline his plan in Pittsburgh on Wednesday, according to White House administration officials.
Regardless, the plan, which will focus on roads, bridges, airports, and green energy initiatives, will most likely be larger in size than any similar initiative before it. Many are estimating the size of the package to be in the trillions, likely near $3 trillion to start, although negotiations with Republicans who worry about tax increases to fund the measures may see the final total revised lower.
Silver is down nearly 6% on the month, and XAG/USD is now trading directly above its 200-day Simple Moving Average (SMA). So far, this key barrier appears to be providing a level of support, with prices remaining above the psychologically important 25 handle.
A break below the 200-day SMA would likely see additional selling pressure mount, perhaps with a move down to the 22.597 area that supported swings lower during the September and November selloffs last year. XAG/USD’s MACD oscillator is skewed to the bearish side as it trends lower. Alternatively, if prices continue to hold above support, a retest of trendline support from the March 2020 swing low remains on the cards to reestablish a bullish technical posture.