EU AND US STOCKS CRAWL BACK BUT QT RISKS REMAIN

European and US futures crawled back after suffering heavy losses in the past few days. At the same time, bond yields stabilized, with the 10-year and 2-year yields falling to 2.60% and 2.44%, respectively. Stocks rose as investors reflected on the latest minutes by the Federal Reserve. The minutes showed that the bank was considering tougher measures to combat the rising inflation. Some of these measures include implementing several 0.5% rate increases and quantitative tightening (QT). Through QT, the bank will lower the size of its balance sheet by $95 billion. HP was among the best performers in premarket after Berkshire Hathaway bought a $4.5 billion stake.

The British pound went sideways after the latest UK home price data. According to Halifax, the country’s home prices rose to a record high in March as demand outweighed supplies. The average home price in the country rose by 43,000 pounds during the pandemic and 11% in March. Prices in March rose by 1.4% compared to February. These numbers mirrored those of Nationwide that painted a similar picture. However, Halifax predicted that prices will cool in the coming months as rising inflation hits household finances.

The Japanese yen continued its sell-off against the US dollar even as the country ended most of its travel restrictions. The country will now allow entry by vaccinated people from 106 countries, including the US, France, and the UK. Japan has been capping entry of non-residents to 7,000 per day. While it has lagged other G7 countries in reopening, Japan has moved faster than China and Hong Kong, Analysts expect that the relaxation of travel will lead to a stronger economy considering that tourists spend about $38 billion every year.

USDJPY

The USDJPY pair has been in a strong bullish trend in the past few days as the Japanese yen decline continued. The pair is trading at 123.90, which is the highest it has been since March 29th. It has moved above the 25-day and 50-day moving averages. It is also slightly above the ascending trendline shown in brown line while the Relative Strength Index (RSI) has moved close to the overbought level. Therefore, the pair will likely keep rising.

EURUSD

The EURUSD pair moved sideways as the market continued to reflect on the Fed minutes. On the hourly chart, the pair is trading at the same point as the 25-period moving average. It has formed a rectangle channel with support and resistance level at 1.0872 and 1.0935. The pair will likely remain in this level during the American session.

NZDUSD

The NZDUSD pair declined slightly as commodity prices eased. The pair fell to a low of 0.6895, which was the lowest level since March 31st. It has moved below the 25-day and 50-day moving averages. It is approaching the important support level at 0.6872, which was the lowest level on March 28. Therefore, the pair will likely keep falling as bears target the support at 0.6872.