Market Update – US Dollar, Gold, Japanese Yen on the Move, Apple Earnings and NFPs Next

The Federal Reserve left interest rates unchanged last night, in line with market expectations, but announced that it would slow its pace of bond sales. Starting on June 1, the Fed will reduce the amount of US Treasuries it allows to roll of its balance sheet from $60 billion a month to $25billion, while $35 billion of mortgage-backed securities will continue to mature. At the post-FOMC decision press conference Chair Powell suggested that rate cuts are still on the table if inflation slows further and that it was unlikely that the Fed would raise interest rates.

The mildly dovish outtake from yesterdays FOMC has buoyed risk markets in early turnover, although a sustained follow-through is unlikely with the latest US Jobs Report (NFP) set for release on Friday at 13:30 UK. Recently announced US JOLTs data disappointed the market as job openings fell to a three-year low.

In the equity space, Apple and Coinbase are among a clutch of US companies announcing their latest earnings today.

The US dollar fell post-FOMC and is back in a potential bullish flag structure made over the last two weeks.

US Dollar Index Daily Chart

The US dollar also came under pressure after heavy buying of the Japanese Yen sent USD/JPY tumbling from a high of 158.00 to around 153.00. The effect of the buying, heavily rumored to be the Bank Of Japan, however, dissipated fairly quickly as USD/JPY moved back into the mid-155s.

USD/JPY Daily Price Chart

Gold picked up a bid on the back of a weaker dollar and lower US Treasury yields. The precious metal slipped to support around the $2,280/oz. level, before moving higher, but yesterday‘s move does not look convincing, especially ahead of tomorrow’s US NFPs. Short-term resistance at $2,342/oz. – trend and 20-day sma – while $2,280/oz. should hold until tomorrows Jobs Report.

Gold Daily Price Chart

IG Retail Sentiment 53.94% of traders are net-long with the ratio of traders long to short at 1.17 to 1.The number of traders net-long is 10.91% lower than yesterday and 7.70% lower than last week, while the number of traders net-short is 4.01% higher than yesterday and 0.42% lower than last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall.