Traders have taken one message from Fed Chairman Jerome Powell’s statement: the dovish monetary policy is here to stay. The fact that Jerome Powell is not ready to change the narrative on the monetary policy, even if the labour market starts to tighten up, sums everything up.
This particular message by the Fed drove the dollar index lower yesterday, and this weakness in the dollar is likely to continue today. Having said that, it is essential to keep in mind that traders do pay attention to other Fed members’ policy stance as well.
Previously, we had seen whipsaws in the market when different members had different monetary policy opinions. Even though the Fed chairman sent a very dovish message to the market yesterday, the fact is that in the coming days, we could hear a completely opposing message from other Fed members.
Hence, traders should take every statement with a pinch of salt because the Fed is very skilled in controlling the market by using its language.
In terms of the economic indicators docket, today, we are going to get the U.S. Weekly Jobless Claims numbers. From the last report, it was pretty clear that the weakness we experienced at the beginning of this year has started to fade again—meaning more strength is coming back into the labour market.
Last weak, we saw fewer unemployment claims than the week before that, and a better number compared to the forecast. The market expectation for today’s number is 775K, and any number that is better than this will further strengthen the argument that the U.S. labour market is gaining its strength.
Crude and Brent
In the commodity trading market, Brent and crude oil prices finally snapped their eight consecutive days of the rally. This is despite the fact that the Crude Inventories data was much better than the expectations, meaning less supply on the market. But the fact is that WTI crude and Brent oil prices have gone too far and too fast, as we discussed yesterday, and a retracement is strongly on the cards.
In the crypto space, Bitcoin’s massive rally has started to fizzle out to some extent as the Bitcoin price fell below the psychological support level of $45K yesterday. Bitcoin price certainly needs to stay above the $40K price, as this is the technical support, and it is also where the 50-day SMA is trading on the 4-hour time frame. (More on how to trade bitcoin)
As for the gold price, we have not seen any stellar price action. Yes, the gold price is on track to record five consecutive days of gains—the longest winning streak since December last year, but the gold price is still quite far from breaking a price level, which changes the narrative about gold.
That price for many traders is $1,900, and if we do see the gold price move above this level, then we do have a hope that the precious metal can have another attempt at the all-time high. (More on how to trade gold)
So far, the Fed’s dovish monetary policy stance and hopes for more stimulus are helping the gold price. Both factors are unlikely to change as the U.S. economy badly needs another stimulus package.
The Fed Chairman confirmed yesterday that he will not move the needle on the monetary policy as we are still far from achieving full employment.