Equities Rebound on Fed’s Bond Announcement, Chair Powell Testifies

Risk Appetite Improves as Fed Widens the Range of Bonds to Purchase

The dollar traded lower against all but one of the other G10 currencies on Monday and during the Asian morning Tuesday. It lost the most ground against NOK, AUD, GBP, and NZD in that order, while the currency against which it underperformed the least was CHF. The greenback gained slightly only versus JPY.

Fed Chief Powell Testifies Before Congress, BoJ Passes Unnoticed

Today though, market participants may stay on the lookout for fresh comments by Fed Chair Powell, who delivers his semi-annual testimony on monetary policy before the Senate Banking Committee. He will deliver the same testimony tomorrow, before the House Financial Services Committee. Yesterday, we noted that this event may not result in any fireworks as we heard from Powell just last week, after the Fed’s monetary policy decision. However, following yesterday’s announcement over corporate bonds, investors may be eager to find out whether the Fed remains willing to do more in order to support economic activity hit by the pandemic. If so, equities and risk-linked currencies are likely to continue their journey north, as investors keep diverting their capital out of safe havens, the likes of the US dollar, the yen and the franc.

AUD/USD — Technical Outlook

AUD/USD reversed sharply to the upside yesterday, traveling back above its short-term upside support line taken from the low of May 15 th. The pair may continue with its journey up if the market sentiment continues to improve. That said, given the sharp upmove seen yesterday, there could be a possibility for a small correction before another leg of buying. For now, we will take a positive approach.

Nikkei 225 — Technical Outlook

After yesterday’s rebound from its short-term upside support line taken from the low of April 3 rd, Nikkei 225 seems to be willing to recover all the losses made last week. The index already has retraced more than half of last week’s slide and it looks like the buyers are not ready to let go of the index that easily. For now, we will stay positive with the near-term outlook and aim for slightly higher areas.

As for the Rest of Today’s Events

Ahead of the EU open, we already got the UK employment data for April. The unemployment rate stayed unchanged at 3.9%, instead of rising to 4.7% as the forecast suggested, while the net change in employment showed that the economy added 6k jobs in the three months to April, instead of losing 83k. Average earnings though slowed by more than anticipated. The including-bonuses rate dropped to +1.0% yoy from +2.4%, while the excluding-bonuses one fell to +1.7% yoy from +2.7%.

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JFD is a leading Group of Companies offering financial and investment services and activities.