Dollar mixed, Oil reverses higher, Gold higher

FX

Expectations still firmly remain in place for a strong synchronized economic boom in the second half of the year which should have safe-haven currencies under pressure. The key observation for currency markets is that most of the advance of the economies (US, UK, Australia, New Zealand, and Germany) are doing well, while emerging markets continue to struggle.

This week the focus will fall heavily on Fed speak which if it continues to support the notion that policymakers are not wanting to talk about tapering anytime soon, the dollar could remain vulnerable against other advanced economy currencies that are well into their respective reopening of their economy.

Oil

Crude prices are softer as the demand outlook starts to take a hit after Taiwan and Singapore announced anti-virus curbs. The more infectious Indian variant is wreaking havoc across Asia as governments announce restrictive measures to try to prevent outbreaks.

The news is not all negative on the demand front as the US saw air travel jump on Sunday to 1.8 million people, the highest total since March 2020. United Airlines also announced they will add 400 daily flights to July for European destinations.

With the commodity rally taking a break, WTI crude could continue to consolidate here until Asia gets COVID-19 under control. Shortly after the NY open oil prices caught a bid as energy traders chose to focus on White House Senior Advisor Andy Slavitt’s tweet that “It appears that cases are down in all 50 states.” Asia is having some concerns but the demand outlook in Asia should follow the US once they get vaccines into people.

Gold

Gold prices are rising and up against massive resistance. The relative heaviness with Treasury yields has done wonders for bullion and that trend should remain intact. Gold investors welcome an unbalanced global economic recovery as that supports easy-money policies to last a lot longer. China’s economic rebound is easing and that should drive Beijing to keep its accommodative fiscal and monetary policies in place for longer.

Gold could extend gains if the 10-year Treasury yield remains stuck in the mid-1.60% area. The biggest risk for gold right now seems to be a stronger dollar could emerge if restrictions in Asia become widespread.

If gold can close above the $1,855 level, bullish momentum could kickstart a bigger rally towards the $1,900 level.

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