The S&P 500 index avoided turning into a bear market as investors reacted to a relatively positive statement from Joe Biden on tariffs. He rose by more points on Monday. Similarly, the Dow Jones and Nasdaq 100 indexes rose more than 700 points and 145 points respectively. At the same time, the US dollar index fell while bond yields rose. In a statement, Biden said his administration was considering scrapping the Trump tariffs. Many officials in Washington believe the tariffs amounted to an unnecessary tax and hope their removal will lead to lower inflation.
The euro rallied against other currencies as investors reacted to a very hawkish blog post from the ECB’s Christine Lagarde. In it, she explained the reasoning behind the bank’s most recent decisions. She also signaled that the bank would adopt a more hawkish tone in the coming months as it continues to battle soaring inflation. She said the bank would start raising interest rates in July and then remove negative rates in September. The mint will react to her statement today in which she will likely explain her case. Markit will also release flash PMI data from the block’s manufacturing and services.
There will be several economic data releases today. Most important will be the latest flash PMI numbers for manufacturing and services in Europe and the US. In the UK, economists expect data to show the manufacturing and services PMIs rose slightly to 56 and 59, respectively. In the Eurozone, analysts expect data to show both fell to 54.9 and 57.5. The other big number will be the latest US new home sales. These figures should show that the housing sector is slowing down. Finally, Jerome Powell and Christine Lagarde will speak.
EURUSD hit a high of 1.0675 after Christine Lagarde’s hawkish statement. It was the highest level since late April. On the four-hour chart, the pair sits along the upper side of the Bollinger Bands. The pair also formed what looks like an inverted head and shoulders pattern. The Stochastic Oscillator and the Relative Strength Index broke above the overbought level. Therefore, the pair will likely continue to rise.
GBPUSD has been on a strong uptrend for the past few days. On Monday, the pair moved above the important resistance level at 1.2500. It broke above the 38.2% Fibonacci retracement level. It also broke above the 25- and 50-day moving averages while the Relative Strength Index (RSI) approaches the overbought level. The bullish momentum is likely to continue.
USDJPY has been moving sideways over the past few days. The pair is trading at 127.8, which is slightly above the key support at 127.0. It formed a descending triangular pattern. Also, it fell below the 25 and 50 day moving averages. The RSI and momentum have increased slightly. Therefore, the pair will likely have a short-term bearish breakout.