USD | Gold Commodities

As they struck a cautious tone, the Fed minutes offered some breathing room for risk assets, with the committee seemingly mindful of the potential increase in US inflation in the second quarter and reluctant to overreact until it is sure that inflation will reach 2% for some time. Emerging market FX remains relatively resilient amid the notable increase in US Treasury yields this year. Not only are EM FX valuations not excessively stretched, many EM currencies are benefiting from increasing commodity prices, but this FX segment should continue to display signs of relative resilience as long as the increase in US Treasury yields is followed by improving global economic prospects. Looking forward, if the Fed is able to walk the fine line between improving economic data and communicating it, the consequent orderly increase in treasury yields does not derail the constructive outlook for the coming months for high yielding cyclical EM FX.


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technical update on XAU/USD by money life research

FYI- that channel as drawn is not valid as there is a violation b/w Feb 15-19.
Unless you’re trying to deploy a FIB channel…even then, you’ll want to add another descending line.

USD: showing tenacity

Global yields have stabilized, paving the way for a large rebound in risk assets, with the S&P500 having its best day in nine months. In terms of foreign exchange, G10 commodity currencies led the way, but the dollar held its ground despite poor demand for low-yielding assets. The Swiss franc remained a big laggard, as markets may have used the opportunity to unwind CHF long positions that had been built up during the pandemic. If risk assets remain supported, the USD/CHF could break above 0.9200. Asian equities have indicated that risk appetite is waning, and stock index futures in Europe and America point to a poor start. Data-wise, it’s been a reasonably quiet day after a solid ISM Manufacturing report appeared to back up inflation fears. For the time being, with low-yielders bearing the brunt of any equity rally, the US dollar can prove resilient if risk assets return to positive territory.

USD: The FOMC’s Brainard should give risk assets some breathing space

FX markets have stabilized overnight, assisted in part by comments from Lael Brainard of the Federal Open Market Committee, who reported that she has been paying close attention to recent moves in US Treasury yields. Since UST uncertainty is currently the biggest risk to risk assets and cyclical FX, these remarks should give higher beta FX some breathing space. In the United States, the priority is on February ISM Facilities. We expect a minor correction from the January reading, which should help risk assets stay stable.