FX.co ★ 26.03.2024: USD set to rule on Forex, though EUR and JPY stubborn

This trading week before the Easter holiday is going to be short. So, markets have turned attention to comments from monetary authorities. The crucial news of the week ending the first quarter will, of course, be inflation reports in the world's largest economies. Ahead of these reports, the market is taking a short break.

At the same time, experts point out that the yen is weakening despite market fundamentals. This is certainly not true because the currency that is backed by a higher interest rate makes the most profit.

High interest rates over a long period of time are a bullish factor for the US dollar, since it attracts a greater inflow of foreign capital. However, on the back of looming forex interventions, the dollar/yen pair is still facing strong resistance today near 152.

However, a sell-off last week has already priced in this policy differential. A pullback of the US dollar, which seemed quite the beginning of a full-fledged correction yesterday, did not develop further. The market in general is trading sideways. The US dollar index is set to hold the upper hand over six major rivals as the US economy outperforms other countries.

In addition, the US dollar is sure to rise because other central banks are more dovish than the US Federal Reserve. Therefore, today the greenback still remains above the 104-point level. On the other hand, the US dollar still remains significantly overbought. Hence, the downward correction resumed today due to profit taking and partly under pressure from a slightly strengthened yen.

The US stock market is also keeping pace with the US dollar. Wall Street's benchmark index has already gained 9.4% since the beginning of the year. However, the S&P 500 has slowed down its rally. In the early New York session, the index was again trading higher in the intraday corridor between 5,227 and 5,235. By the way, based on the results of 2024, Goldman Sachs experts predict growth for this indicator to 6,000 points.

Amid a pullback of the US dollar, the euro also perked up. The euro/dollar pair showed gains today within the intraday corridor between 1.08391 and 1.0867 as traders took profits after last week's volatile sell-off.

After all, the difference in rhetoric of the Federal Reserve and the ECB suggests that the euro’s weakness is realistic. At the same time, the US dollar is likely to consolidate rather than stage another rally.

In any case, the euro/dollar pair reversed upward after a downward cycle and even tried to test the resistance of 1.0865. Taking into account the scale of the euro’s weakness and the same fundamental factors, the recovery stage of the euro will be short-lived.

Today, the fall of the US dollar encouraged growth of oil prices. Bearing in mind a jump of 1.5%, we conclude that Brent crude has ended its 4-day retracement. However, the bullish cycle will be confirmed when the price updates the local high around 87.5 dollars per barrel.

Until then, Brent crude is likely to trade sideways. In addition, oil prices are supported by concerns about a reduction in supplies amid a decline in oil output in Russia and geopolitical conflicts. Therefore, the benchmark Brent not only rose yesterday, but its price also completed a corrective movement.

At least, such signals are given by technical indicators, but there were no fundamental reasons for such a movement in the chart. Data that could influence oil prices will be available today. If the American Petroleum Institute reports a decline in US oil inventories, oil prices could resume an uptrend.