Overnight Headlines

*Record closes on Wall Street, Dow moves above 34,000

*USD unmoved by largest gain in retail sales in 10 months

*Chinese Q1 GDP 18.3% versus 19.0% expected

US equities closed at record highs thanks to more solid earnings and strong domestic economic data. Retail sales beat expectations with the biggest increase since May 2020 while weekly jobless figures hit the lowest level since the negative effects of the pandemic crisis began.

USD had a mixed session against its major peers with the USDX marginally higher and downside momentum waning. Prices are sat on the 50-day moving average so 91.60 is offering support afte the tumble at the start of the week.

Market Thoughts – US economy humming along, USD not so

While earnings continue to offer support to higher stock market prices, the current strength of the US economy is not helping the greenback along the way. The dollar has strengthened this year on the back of its rising interest rates (ie US Treasury bonds yields) so while these fall or at least stabilise, investors turn their attention to other currencies more in tune with the potentially booming global economy.

With the upturn in risk sentiment and struggling dollar, so commodities are regaining their bullish momentum. For example, copper hit its highest level since February overnight with bullish range expansion clearly underway. Oil too continues higher on its fifth straight day of gains after breaking out. Any pullbacks look like a buying opportunity in this environment.

Trade of the Day – Gold looks good for more upside

Gold is enjoying the weak dollar and those falling yields. That’s because a weaker USD makes bullion cheaper for holders of other currencies while higher bond yields increase the opportunity cost of holding the non-interest yielding gold.

The yellow metal broke out of its recent sideways trading yesterday and hit six-week highs at $1769. While we didn’t close above key support/resistance at $1764, the well-watched double bottom (albeit a touch messy) could be in play. That means higher prices if we get a decent weekly close. The target for the double bottom is the height of the pattern added to the breakout point which is around $1830. Bulls will have to battle with the 100-day moving average before this at $1800, while this week’s low at $1723 is a decent place for a stop loss.

Key Event – ECB, BoC and earnings next week

Today is a rather slow day on the data front with just Eurozone inflation numbers to catch the attention. But next week sees a couple of central bank meetings and more earnings from the likes of Netflix and Intel.