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Dollar Rallies, Europe Lockdowns, Oil Rebounds

29 March 2021

It was a week defined by congressional testimonies, panel discussions and speeches from central bank officials. Turkey hijacked the financial markets headlines on Monday following President Erdogan’s decision to sack the country’s central bank chief over the weekend. 

The Turkish Lira tumbled 14% against the Dollar during early trading, sending shockwaves across the FX space. The Lira has weakened against every single G10 currency this week. 

In Our weekly technical outlook, we focused on longer-term trends found on higher timeframes. The bearish weekly setups on the EURUSD was triggered. It was a healthy start to the week for technology stocks with the Nasdaq 100 minis trading towards their 50-day simple moving average. The index was unable to break above this point with prices dipping back below 12650.

The Dollar caught our attention after pressing against 92.10. Over the past few weeks, the Greenback has derived strength from rising bond yields. Encouraging developments on the vaccine front in the US have fuelled hopes for a faster US economic recovery – adding to the Dollar’s upside. After appreciating against every single G10 currency this week, prices could extend gains in the week ahead. A solid weekly close above 92.50 could send the DXY towards 93.00 and beyond.

Interestingly, the market sentiment turned fragile mid-week as investors braced for the “Big Two” (JWELL aka Jerome Powell and Janet Yellen).

In other news, virus-related developments in Europe hit the Euro and commodities. Germany announced an extension of Covid restrictions until mid-April with a five-day circuit breaker around easter. This led us to question whether the EU’s tougher vaccine export rules could save the Euro?

Our stock of the week was Microsoft. According to media reports, the tech giant was in talks to acquire Discord Inc. for a $10+ billion price tag. Microsoft shares are up almost 2% this week. As the week progressed, the Dollar extended gains while global stocks were mixed as investors struggled to shake off concerns over Covid-19.

Bitcoin was back in the headlines after Tesla chief Elon Musk said the company’s electric vehicles can be bought using cryptocurrency.

The CEOs of Facebook, Alphabet, and Twitter faced US lawmakers again on Thursday.  Near the end of the week, Our Chief Market Strategist Hussein Sayed dissected the Dollar outlook and laid bare the fundamentals. 

In the commodities arena, Gold was heading for a weekly loss despite the concerning developments revolving around Covid-19 in Europe. An appreciating Dollar has given the precious metal a hard time with prices trading below $1730 as of writing. 

Oil prices were also heading for a weekly loss despite the supply-related concerns caused by a giant vessel blocking the Suez Canal. Bears are likely to be inspired by the shaky demand outlook, especially after fresh lockdowns were enforced in Europe amid surging Covid-19 cases.  On the bright side, the mood across financial markets improved on Friday, thanks to encouraging data from the United States and Biden’s upwards revision to his ambitious vaccination target.



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