Overnight Headlines

*USD ended lower for a third straight day below 90

*US equities slipped despite better-than-expected retailer earnings

*Bitcoin drop continues, below $40,000 for the first time since February

US equities closed lower for the second day with inflation and labour shortage pressures not going away.  With the Vix creeping higher, defensives outperformed cyclicals and growth beat value. Even bumper earnings from big retailers Walmart and Home Depot failed to sustain the bulls. Asian markets have dipped while European bourses are set to follow Wall Street’s lead and open firmly in the red.

USD closed near its lows settling below the 90 level for the first time since the start of January early this year. Support on DXY lies at the February low at 89.68 ahead of the year-to-date low at 89.20. Both the euro and pound surged to highs not seen since late February with the strongest close in the single currency since January, while USD/JPY had the biggest drop in a week.

Market Thoughts – Fed minutes on the radar

Today’s focus will be squarely on the minutes from the Fed’s April meeting released later today. An increasingly upbeat economic recovery needs to be reconciled with the “transitory” inflation drivers that Fed members have been sticking to. Markets are having a hard time agreeing with that assessment, so will a patient Fed slowly dampen expectations of an early policy adjustment, especially as the labour market still retains a high degree of slack?

This view is obviously heaping pressure on USD sentiment as the greenback heads towards this year’s lows. For the euro, the strong bounce off the 100-day SMA could mean possibly this year’s peak at 1.2349 if bulls get past 1.2243.

Chart of the Day – Bitcoin hammered

The world’s most popular virtual currency is suffering at the hands of the world’s second richest person and Chinese regulators. Bitcoin traded near $60,000 just two week ago but has crashed through $50,000 and now $40,000 this morning. Although Elon Musk denied Tesla has sold or will sell its holdings, China has banned financial institutions from offering virtual currency services in a further blow to virtual currency supporters.

Once April support around $47k was broken, we’ve seen a move through the February low at $43,016 and last January’s high at $41,986 today in bitcoin and it now trades on its 200-day SMA. We are oversold and drifting along the lower Keltner band, but bears are targeting the psychological $35k level with such strong momentum. Virtual currency traders are not specially used to a two-way market, so it is certainly interesting times in BTC.