On Tuesday, the Dollar Index (DXY) fell all the way to the 101.00 area. This decline is notable and arrives as sentiment is turning more favorable across the risk-linked markets. This change in market positioning has had an outsized effect on most relevant currency pairs and commodity prices foreshadowing a larger recent shift in the tides of market flow.
Struggling to Hold DXY largely lost its grip as investors displayed healthier inclination to riskier assets. The positive sentiment had the effect of creating a selling pressure on USD/JPY. Consequently, the currency pair retreated to near 147.40 after test seven-week highs near 148.60 the prior day. This volatile change is an indicator of traders’ cautious optimism about the state of global economic growth.
GBP/USD carved out a significant reversal low just above the 1.3300 psychological barrier. Their return signifies the extent to which the British pound has rebounded. That has helped it flourish given the current weakness of the U.S. dollar, overall. EUR/USD recovered back towards the 1.1180 area. Traders were quick to respond to the dollar’s weakening strength, driving the Greenback back from multi-week lows.
Silver prices were weak, and fell back below the $32.50 level. They were never able to build on the thrust once they first broke back above the $33.20 area. This precious metal’s failure to hold on to upward momentum is a sign of wariness from investors in the commodities space. Meanwhile, for the fourth straight day, WTI crude oil prices increased, getting closer to the $64.00 boundary per barrel. The continued increase is attributable to continuing supply fundamentals and bullish speculation in the market about fuel demand.
Not surprisingly, the Australian dollar put on the most impressive show of strength. It broke above the important 0.6400 resistance and advanced above its 200-day Simple Moving Average (SMA). This shift signifies a sharp reversal from Monday’s sizeable drop. Traders are positioned in nervous anticipation of a measured recovery.
Gold prices managed to stay in a relatively tight range around the $3,240 area per troy ounce, showing some resilience even as overall market conditions remained volatile. Investors are on high alert looking for movements in economic data and global flare-ups that may affect the path that gold takes.
Germany’s final Inflation Rate comes out on May 14. This announcement has the potential to have a tremendous impact on the Eurozone’s economic future and the strength of its currency. As markets await this critical data release, traders will likely adjust their strategies based on anticipated inflation trends and central bank responses.