Over the past two weeks, global investors have been gripped by key central bank policy meetings. Markets have been hungry for clues about how the US Federal Reserve, the European Central Bank, the Bank of England and the Bank of Japan, intend to adjust their respective policies.

These major central banks have been buying up billions of dollars’ worth of bonds, and even ETFs, to support their respective financial markets. Given the forward-looking nature of the markets, investors are already trying to pre-empt when these policymakers would pare back those bond purchases, and such shifting expectations have rocked multiple asset classes, from US Treasuries, to the Dollar, and even tech stocks on the Nasdaq 100.

And of course, investors and trader are never fully satiated. Just because the interest rate decisions are over for the time being, doesn’t mean traders and investors can take their eyes off central banks.

This week heralds a smorgasbord of more speeches and panel discussions by key figures:

Monday, 22 March

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  • Fed Chair Jerome Powell speaks at BIS Summit
  • Fed speak:
    – Richmond Fed President Thomas Barkin
    – San Francisco Fed President Mary Daly

Tuesday, 23 March

  • Fed Chair Powell and Treasury Secretary Janet Yellen to deliver joint testimonies about pandemic response policies
  • Fed speak:
    – St. Louis Fed President James Bullard
    – New York Fed President John Williams
  • BOE speak:
    – Governor Andrew Bailey
    – Chief Economist Andy Haldane
    – Deputy Governor Jon Cunliffe

Wednesday, 24 March

  • Powell and Yellen joint testimonies about pandemic policies
  • Fed speak:
    – Williams
    – Daly
    – Chicago Fed President Charles Evans

Thursday, 25 March

  • ECB President Christine Lagarde and BOE Governor Bailey speak at BIS Summit
  • Fed speak:
    – Williams
    – Evans
    – Daly
    – Atlanta Fed President Raphael Bostic
    – Fed Vice Chair Richard Clarida

 

All these scheduled speeches should keep traders and investors occupied over the coming days, especially when it comes to the Fed speak. As I had stated last Friday:

The slew of Fed speak in the upcoming week could also act as a volatility trigger point, especially if any of the officials offer different views from what had been conveyed by the Fed Chair himself after (last) week’s FOMC meeting.

Dollar in focus

From a technical perspective, the FXTM USD index has the potential to enjoy more near-term gains, seeing it has yet to reach the upper band of its Bollinger band (black broken lines). The 50-day simple moving average (SMA) is set to act as its immediate support level. Traders will be offered a stronger bullish signal if this USD index can breach its 100-day SMA (green line) and secure a meaningful breakout out of the downward trend (red lines) that has firmly been in place since March.

Note that the FXTM USD index is an equally-weighted index comprising the following major pairs:

Looking beyond the charts, the US Treasury has over US$180 billion worth of notes to be auctioned off this week. Poor demand for these government bonds could send yields skyrocketing even higher!

Those rising yields resulting from the selloff in Treasury markets have in turn encouraged more demand for the US Dollar. The dollar’s recovery has then weighed on demand for precious metals, such as gold, which have an inverse relationship with the greenback.

Should Treasury yields keep rising and offer support for the US dollar, that should ensure that gold bulls are kept on a tight leash, making it harder for them to push spot gold higher.

 

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