Dollar drops, sending PMs higher
22 October 2021
The greenback continued in its short-term downtrend, and yesterday's small rally was immediately erased.
The dollar index is trying to decline below its previous highs at 93.60/50, likely ending the current medium-term uptrend.
Elsewhere, US yields continue to rise higher, with the 2-year yield soaring 20% yesterday (from 0.38% to 0.46%), while the 10-year yield advanced to six-month highs above 1.7%. Nevertheless, these developments did not support the US dollar, and even precious metals are flying higher, a rather strange behavior.
By jumping above 23.50 USD, silver effectively canceled the medium-term downtrend, and it managed to settle above 24 USD, looking bullish. However, the situation is not that clear for gold, and it is having issues staying above 1,800 USD.
From other news, UK retail sales unexpectedly fell in September for the fifth month in a row. Sales were down 0.2% versus expectations for a 0.5% increase, driven by a drop in non-food sales. The Office for National Statistics said this was the longest run of monthly declines in a row since the survey began in 1996. Nevertheless, the GBPUSD pair was unaffected and was trading slightly higher.
US equities rallied yesterday, although the after-market action was bearish, sending futures lower. Today, indices are seen slightly higher during the London session.
Later in the day, Federal Reserve Chair Jerome Powell will participate in a virtual panel discussion titled "Monetary and financial stability challenges to central banks in the wake of COVID-19" at an online conference hosted by the South African Reserve Bank. Since his topic is monetary policy, it could cause volatility in the markets.