US and European futures are extending gains early Monday, while the Treasury contracts are trading modestly lower. The focus among investors and traders remains on two major factors: firstly, the ongoing US earnings season, and several US banks, such as Goldman Sachs, will report their earnings today and are likely to drive the price action for the majority of the markets. Secondly, traders continue to bet on the Fed’s monetary policy after the red hot US inflation data which came out last week.
Regarding economic events, the European Central Bank’s meeting on Thursday will be the highlight of the week as the bank could bring something unexpected to the table to save the current plunge in the euro.
Forex
The dollar index continues its weakness among all major FX pairs. Traders are closely monitoring the USD/JPY, EUR/USD and GBP/USD pairs this week. There is no doubt that EUR/USD and GBP/USD were extremely oversold over the number of days, and now is the time for these currency pairs to recover some of the losses.
Traders will continue to focus on the credibility of the ECB as it continues to fight for its credibility. Restoring confidence in its ability to maintain price stability will remain the major focus while the central bank announces its monetary policy decision on Thursday.
Overall there is no shortage of bad news for the Eurozone as the new crisis in Rome will continue to influence the Eurozone’s single currency adversely and growth as well. If you look at recent surveys, it becomes even clearer that many speculators and professionals are betting on the fact that the region is unlikely to avoid an economic downturn over the next six months.
Oil
Crude oil prices remain unfazed by Biden’s visit to Saudi Arabia, while prices for both Crude and Brent oil continue to grind higher on Monday. Last week’s sell-off became an opportunity for many as investors are still betting that oil prices are unlikely to drop significantly anytime soon.
Traders got one clear message from Biden’s recent visit to Saudi Arabia, during which President Biden spoke to several Arab leaders. The message is that it is OPEC+ that makes the oil supply decision, and the cartel isn’t remotely interested in what Biden is trying to achieve. OPEC+ will continue to control oil supply, and one country alone cannot determine the oil supply—at least that is the message that traders have taken from Biden’s visit to Saudi Arabia.
Brent oil prices crossed above the $100 price mark earlier today, and if the price continues to trade above this price mark, then it is highly likely that the path of the least resistance will be skewed to the upside.
Gold
Gold prices are on the move today, recovering some of the losses they experienced in the past few days. The recovery is not mainly due to the risk sentiment; today, traders are ready to back riskier assets. The rally in the yellow metal is due to weakness in the dollar index, driving the price move. Traders should not make mistakes by thinking that the dollar weakness is taking place and that the Fed will change its monetary policy stance. The Fed is only going to tighten the screws of its monetary policy, and its next move is likely to be an increase in the interest rate by 75 basis points. This means the current trend in yellow metal prices could be short-lived as the dollar index will likely bounce back and remain the only dominant force in this area.
Bitcoin
Cryptocurrency king continues to fight gravity, and prices over the weekend remained stable despite more bad news headed for the sector after Celsius, a project which made too many unrealistic promises. Overall, there is no doubt that all of the bad news is very much priced in this space and any information of further fall out of other crypto funds or crypto projects isn’t able to shake prices further. This is an important point to pay attention to because if it continues to hold, one could seriously indicate that a bottom may have formed for cryptos.