The risky assets continue to benefit from large-scale stimulus measures. Last Friday, the S&P 500 closed at a new record high for its sixth straight weekly gain and at the same time, the Asian and European indexes are also increasing.
And while unprecedented stimulus measures and high vaccination rates are helping to update record stock indexes, the government's position is noticeably less convincing. The Treasury's report on foreign capital inflows published on Friday showed that the attractiveness of dollar-denominated assets is not as obvious as it might seem – the inflow to the stock market in the last 3 reporting months (from December to February) slowed down, and the total position on Treasury Bonds & Notes reached a new anti-record of -685.2 billion.
The amicable outflow of foreigners from the US T-bills market may lead to a lack of liquidity, after which problems with the placement of new issues will begin.
The CFTC report is also worth paying attention to, since there are also questions about it. On the one hand, the cumulative speculative position on the USD against the G10 currencies continues to decline, which is apparently a bullish factor for the dollar. At the same time, this position still does not get out of the negative zone, and the rate of shorting has slowed to almost zero. In other words, the trend in favor of the US dollar is still developing, but the strength of this trend has become quite unconvincing.
It can be assumed that this week will be unsuccessful for the dollar. If US Treasury yields continue to decline, then the USD will most likely continue to weaken.
On April 22, the ECB will hold its planned meeting. The monetary policy is expected to remain unchanged, so all the market's attention will be directed to the PEPP asset purchase program. So far, the PEPP program performs one very important function – it restrains the growth of yields and does not allow the development of another debt crisis, so there is a low probability that PEPP will be reduced or even announced its reduction in the near future. In addition, the Bundesbank is in favor of the immediate end of the PEPP program, but its influence will not be enough to overcome the resistance of the countries of Southern and Eastern Europe.
Accordingly, the results of the ECB meeting will be most likely neutral for the Euro currency, with a bias towards the bearish direction.
Euro's target price has turned upwards and is currently slightly above the long-term average. On the spot, the euro managed to go above the resistance level of 1.2010, which increased the chances of a return to the bullish scenario.
From the point of view of technical analysis, a short-term bullish impulse is developing. It will be considered as a correction until the resistance level of 1.2242 is broken through. At the same time, an upward reversal of the target price indicates that there might be incoming new fundamental factors, and now, it is impossible to recommend selling on growth. The next resistance zone is 1.2090/2110. Most likely, this zone will be reached.
The current week will be extremely busy for the pound sterling. On Tuesday, a report on the labor market for March inclusive will be published, while on Wednesday, inflation data will be released and the Governor of the Bank of England, Bailey, will make a speech. As for Friday, the GfK consumer confidence index and retail sales will be published.
Just like the case of the euro, the pound's estimated price is trying to move above the long-term average.
The pound has reasons to continue to grow, as, on the one hand, the demand for risk is growing, and on the other, the market reaction to the problems with AstraZeneca was restrained. Meanwhile, Brexit negotiations on Northern Ireland are continuing. Britain has requested an additional 1 month to resolve the contradictions and the EU has agreed. Technically, the pound will not experience pressure from this side in the next few weeks.
It can be assumed that the resistance level of 1.3916 will fall in the near future. The next target is set at 1.4000/20, but further dynamics will depend on the incoming macroeconomic data.