US indices diverge from European peers after Fed minutes

US stock futures declined today as the market started to worry about potential interest rate hikes. Futures tied to the Dow Jones declined by more than 150 points while those linked to the S&P 500 and Nasdaq 100 indices declined by more than 0.35%. This is the opposite of what happened in Europe where the DAX and FTSE 100 rose by more than 0.20%. The FOMC minutes published yesterday revealed that some members started to discuss potential tightening. This is notable since the meeting happened before the US published the April inflation numbers. Therefore, while Fed officials have continued sounding dovish, there is a possibility that they will start talking of tightening in the next few months.

The Japanese yen was little changed today after strong economic data from Japan. The numbers revealed that the country’s exports rose by 38% in April, an improvement from the previous 16.1%. In the same period, imports increased by 12.8%. This pushed the country’s trade surplus to more than 255 billion yuan. However, Japan is still facing substantial risks. For example, the government has not yet ended the state of emergency announced in several places. Also, the rollout of the coronavirus vaccine in the country has been slower than in other countries. Most importantly, the country’s manufacturers are still finding it difficult to source chips, which could affect their business.

The New Zealand dollar was little changed after the latest budget by the country’s government. The government expects that the economy will recover at a faster rate than expected. In the budget, the Jacinda Arden administration focused on welfare programs that will move many from poverty. For example, it will spend NZ$3.3 billion to boost benefits for tertiary students. It will also boost spending for Pharmac, the country’s drug-buying agency, and spend millions to build 1,000 houses for Maori. 

EUR/USD

The EUR/USD pair was little changed today as traders reflected on the hawkish FOMC minutes. It is trading at 1.1.2198, which is slightly above the intraday low of 1.2160. On the hourly chart, the pair is slightly above the 25-day moving average and slightly below the important resistance at 1.2245. The price is slightly above the middle line of the Bollinger Bands while the Moving Average of Oscillator has moved above the neutral line. Therefore, the pair may keep rising as bulls target the next key resistance at 1.2245.

NZD/USD

The NZD/USD pair was little changed after the latest New Zealand budget. It is trading at 0.7185, which is lower than this month’s high of 0.7300. On the four-hour chart, the pair seems to have formed a head and shoulders pattern, which is usually a bearish signal. The signal line of the MACD has also moved slightly below the neutral line. Therefore, the pair may break out lower as bears target the next key support level at 0.7115.

XAU/USD

The XAU/USD pair rose to an intraday high of 1,890 after the FOMC statement. On the daily chart, the pair has moved above the 25-day and 15-day exponential moving averages (EMA). It has also formed an inverse head and shoulders pattern while the Relative Strength Index (RSI) has moved close to the overbought level. Gold prices may keep rising as investors rotate from Bitcoin to the metal.