Overnight Headlines

*USD hits three-week lows as bond yields fall

*Global stocks and Bitcoin make fresh record highs

*RBNZ stands pat on policy as expected, NZD leading major

*First quarter bank earnings in focus

USD fell to three-week lows after traders looked through the leap in US inflation and backed the Fed’s stance on the temporary nature of rising prices. The pause in the rollout of the J&J vaccine no doubt helped too, which may mean the reopening of the world’s biggest economy risks being delayed. USDX has broken out of its recent range and down through the 92 support level, so now targets 91.31, the mid-March lows.

US equities again hit the heights with the broad S&P500 making new highs, while the Nasdaq, laden with technology and stay-at-home stocks outperformed the Dow and its cyclicals. Asian stocks are positive as markets take the negative vaccine news in their stride.

Market Thoughts

The big jump in the widely anticipated US CPI data was not a surprise as the market breathed a big sigh of relief the data wasn’t at the highest end of estimates. Traders appear to be backing the Fed’s conciliatory words for now, or at least acting on a “buy the rumour, sell the fact” basis with the data.

This is important for traders going forward as the Fed have been arguing that the numbers will drop back towards their 2% target fairly quickly and this is what the market is going with for now. But if the economy continues pushing out blowout data with house prices and the job market especially on an upward path, then the world’s most important central bank may have to change course, which may ultimately push the USD higher.

Charts of the Day

Bitcoin has broken out to the upside in textbook fashion! We’ve seen a series of higher highs and higher lows since January with the 50-day moving average supporting prices all along the way. The $60,000 mark offered some resistance as prices formed a bullish ascending triangle but BTC has now pushed above $64,000. The public offering of Coinbase is adding to the euphoria of digital assets in general. We are in unchartered territory once again which means in this scenario, round numbers are often the target, so $70,000!

Bank earnings will be in focus with Goldman Sachs, JP Morgan and Wells Fargo all reporting ahead of the US open today. EPS for the latter is expected at $0.68, up from $0.01 in the same period a year earlier and revenues of $17.5 billion, down from 1.5% from the fourth quarter.

Technicals show us that Wells Fargo is consolidating near the highs and trading above the 20-day and 50-day moving average. Strong support comes just below $38 at $37.82 with resistance at $41.50 – the post pandemic peak. Momentum indicators have turned lower after the sell off yesterday but have eased from the March highs. Bumper results should see us challenge and potentially break to new ground.