US Dollar is Breaking Record Highs – 03.05.2022 – Official Olymp Trade Blog

While the USD rose to its highest levels since the pandemic began more than 2 years ago, other currencies moved down.

On Wednesday, April 27, at the beginning of the European session, the USD traded at its highest levels in two years on safe-haven demand. Global investors were mostly reacting to the geopolitics and the prospects of further tightening by the Federal Reserve. The price made its strongest moves since March 2020 and may be making its best month since 2015.

On the same day, EUR dropped below $1.06 for the first time in five years. Generally, in April, EUR moved down more than 4% and headed for its worst monthly loss in more than seven years. Energy security concerns and slowing growth in China and Europe are among the main reasons. Particularly, when Russia's Gazprom said it would cut gas supplies to Poland and Bulgaria, EUR moved down to a five-year low. With the background of the deepening Russia-Ukraine crisis and the stalemate over fuel payments, the prospect of Russia stopping gas flows to Poland and Bulgaria may keep putting downward pressure on EUR and further strengthen USD’s safe-haven growth.

Germany's yearly economic growth outlook for 2022 was revised to 2.2%, down from the forecast of 3.6% in January. The revision reflects the challenges faced by consumers in the country, record prices, and uncertainty for businesses. The forecast for 2023 is 2.5%.

AUD started going up after last week’s downward movement. Australian inflation keeps growing, with the year-on-year CPI in Q1 rising to 5.1% after Q4’s 3.5%. The Q1 beat the consensus of 4.6% and was the highest since the GFC in 2008. With the menace of growing inflation, the Reserve Bank of Australia will likely hike rates to halt it. However, the RBA will probably wait for the federal elections in May to end before it starts any major move in the monetary policy. The plan will be discussed next week.

Expectations of the Federal Reserve’s tighter policies and safe-haven demand boosted the USD.

On Wednesday, April 27, USD rose to its highest level since the COVID-19 pandemic began and was set for the best month since 2015. Mostly, it was due to prospects of aggressive rate hikes in the US and global investors’ shift towards safe-haven assets.

EUR/USD made a steep drop after its last swing high at 1.09356 on April 21. The recently hit level of 1.04383 is the lowest since March 2017. On the daily chart above, the decline will likely test the downward trend near a strong psychological level of 1.0500. We believe EUR/USD will keep going down in the near term, especially if it breaks the mentioned support level.

AUD/USD is Going Down

AUD/USD is staying down in the zone of two-month lows.

The rate hike prospects reinforced by the growing inflation report boosted AUD. In this regard, CPI is key to measuring inflation and assessing the shifts in consumer trends. Usually, if the CPI is going up, it pushes the AUD to the upside. A low reading drags the currency down.

As AUD is a risk-sensitive currency, a surge in risk concerns weighed on it and brought it to two-month lows. Particularly, obstacles in the way of China’s economic growth such as the consequences of the zero-Covid policies may disrupt supply chains and impact the Australian economy.

While AUD/USD currently presents mixed trends, it will likely move towards 0.7100. The price needs to consolidate below this level to keep the negative scenario active. In this case, we recommend traders wait for indications of further moves toward the downward target levels of 0.7050 and 0.6990. The RSI indicator shows that the price has started to move into the oversold zone, confirming the possibility of a downward scenario.

US stocks edged higher, making most major indexes regain some of their losses after a sell-off in the previous session.

April has historically been a strong month for stocks. Previously, in 15 of the past 16 years, the S&P 500 gained in April. But this time, the Russia-Ukraine conflict, the Federal Reserve's rate hike, growing inflation, and disruptions in supply chains may all put too much pressure on the economy.

In Europe and Asia, major stock indexes have been mostly falling on continued fears that the COVID outbreak in China will lead to lockdowns and global supply chain disruptions. US stock futures moved up, helping major indexes regain some of their losses on Wednesday after the previous session’s sell-off. Futures for the S&P 500 were up 0.4%, and the Dow Jones Industrial Average was up 0.6%. The contract for the technology-focused Nasdaq-100 rose 0.2%.

On a year-to-year basis, the S&P 500 is down 12% and the Nasdaq Composite is down 20%. On Tuesday last week, the Nasdaq Composite posted its biggest one-day percentage drop since September 2020. Dow was also down below 800 points as investors were assessing the earnings reports and factoring in inflation, the US Fed’s tight policy outlook, and the spread of Covid-19 in the US.

US equity futures edged higher in pre-market trading on April 28 after a choppy previous session as the market attempted to recover from a sell-off earlier this week.

Brent is trading flat due to mixed supply and demand. Together with the conflict between Ukraine and Russia that sees no near resolution, the new spike in coronavirus cases in China is pressing on the oil demand and dragging the oil price down. At the same time, as Russia is one of the largest oil producers, the sanctions put on it are driving the oil price upwards. Together, these opposing factors made the price settle in the zone of historic highs.

Currently, Brent oil trades around $104 per barrel, with the broken up trend line from November 2021 serving as a resistance level. The World Bank Group believes the price will likely stay above $100 and average at this level through the entire year. For this week, the support level is at $100 and the resistance level is at $109.

So far, the price of Natural Gas has been elevated as Russia has cut off gas supplies to Bulgaria and Poland because those countries refused to pay for it in Russian rubles. Last Monday, the price dropped to 6.482 and touched the uptrend line from mid-March but closed the day near $7 MMBTU. We believe prices will likely stay elevated with this week’s support targets around $7 and resistance at $7.763 and $8.

FOMC Hawks dampen the outlook for Gold investors. Except for just two days during this month, the Basic Dollar Index has been trading up throughout the entire of April starting from the last day of March. BDI reached 104.038, and breaking this level opens the way to the price zone last seen in 2002.

The increase in the US Dollar is due to the upcoming FOMC meeting on May 4. The Federal Reserve is expected to raise the interest rate by 50 basis points, bringing the key interests up to 1%. As the US Dollar rises, Gold may become less attractive to foreign investors. Last Monday, Gold broke below the 50% Fibonacci level and is now challenging the 61.8% Fibo level downwards. This week’s support target can be at $1,850 per troy ounce and the resistance will be the 50% Fibonacci level at $1,925.