Reversal on the Dollar accelerates

Tuesday brings us further strengthening of the American Dollar and, influenced by that, weakening of commodities. It looks like a bigger correction is underway on these two types of assets, while indices remain stable and are trading within the range from the last two weeks.

The currency market saw some major reversals yesterday with the one on the EURUSD being the most important. In the early stages, EURUSD managed to make new, mid-term highs but they were quickly rejected and the price dropped significantly, creating a shooting star on the daily chart. This is a negative factor, especially when being present slightly below the 38,2% Fibonacci which usually plays the role of important resistance.

USDJPY also reversed sharply, in this case to the upside. The price is now on a good way to test the 139 as the closest resistance level which was a key support in November. NZDUSD and AUDUSD both dropped significantly and are continuing the weakness trend today. Both of them were certainly influenced by the interest decision from Australia that had been made a few hours earlier. There was no surprise at RBA delivering the 25bp hike. RBA noted that further rises in both inflation and rates are highly expected.

The interest rate decision in Australia was the most important piece of data in today’s calendar, suggesting that the rest of the day should be fairly quiet.

Commodities dropped yesterday with the largest loss noted on natural gas who dropped by more than 11%. Oil also fell sharply, mostly due to the agreed cap on Russian oil implemented by the EU, G-7, and Australia. WTI oil lost almost 4% in one day. As regards metals, the precious ones had a really rough day. Silver lost more than 3.5%, palladium and platinum around 2%, while gold finished Monday at -1.5%. When looking at the technical situation on the charts, we can say that further losses are almost certain, at least in the short and mid-term.