• US dollar rally stalls near four months highs
  • USDCAD turns bullish amid dollar strength bulls in control
  • Euro weakening against the Japanese yen sends EURJPY to lows of 128.20
  • US stocks under pressure at record highs indices retreat
  • Gold bulls eye $1800 on the softer dollar.

The US dollar is yet again in the spotlight ahead of the release of Federal Reserve minutes. The de-facto global currency remains elevated at three-week highs, having received a boost from disappointing retail sales data that has once again fuelled bond tapering chatter.

USDCAD bounce back

While the greenback did edge lower early Wednesday morning, it continues to attract bids as traders rush to safe-havens away from riskier currencies owing to growing COVID-19 concerns.

USDCAD has bounced back, rallying to three-week highs above the 1.2600 level with the dollar near four-month highs. The pair had initially come under pressure on the dollar retreating. The USDCAD remains well supported for further gains above the 1.2591 level.

On the flip side, a pullback followed by a close below the 1.2590 level could accelerate a slide to lows of 1.2520 levels.

Chart showing USDCAD rally

Focus in the currency market is on the FOMC minutes later that could sway dollar strength and influence USDCAD’s direction. Additionally, weakness in the Canadian dollar owing to a slide in oil prices should continue to offer support to a spike in USDCAD.

EURJPY tanks to five months lows

While the Japanese yen is under immense pressure against the dollar, it continues to hold firm against the EUR. Consequently, the EURJPY pair has dropped to five months lows after closing below the 129.00 level.

Chart showing EURJPY sell-off

The pair’s sell-off has reached March lows of 128.20 and is susceptible to further losses below the 128.00 level. The sell-off is shunning riskier currencies of the likes of the euro in favour of safe-havens such as the dollar and the yen.

Euro sentiments have also been weighed heavily by growing concerns over the potential effects of the escalating COVID-19 situation due to the Delta variant’s spread.

Gold bulls eye $1800

Gold bulls are yet to gain the spotlight in the commodity markets after a breather on Tuesday. XAUUSD is looking increasingly bullish, with buyers eyeing the $1800 psychological level. The precious metal finding support above the $1780 level has fuelled optimism of further price gains towards the $1800 level.

Chart showing XAUUSD  bounce back

The bullish tone on the bullion is being fuelled by dollar strength, losing some steam near four-month highs. Additionally, the escalating COVID-19 situation around the world has once again triggered the metal’s safe-haven credentials, helping shrug off dollar strength across the board.

Focus in the market is on the FOMC meeting minutes on Wednesday at 1800 GMT that should provide insights on the central bank tapering plans. Additionally, a bounce-back in Treasury yields could curtail upside attempts on the gold price.

US indices retreat

US stocks turned red on Tuesday, sending all the major indices lower. Weaker than expected economic data is already fuelling concerns about the health of the US economy. The spread of the Delta variant and its potential impact is also sending jitters in the equity market.

Chart showing S&P 500 sell-off

All the major indices snapped a five-day winning streak. The S&P 500 was down 0.7% as the Dow fell 0.8% and the NASDAQ fell 0.9% as traders reacted to disappointing retail sales data for July. The sell-off signals the market is starting to feel the pinch amid decelerating growth.

Bitcoin and Ethereum pullback

Cryptocurrencies are yet again under pressure after a recent rally from five-month lows. BTCUSD has started edging lower after struggling to power through the $48,000 level. However, the flagship cryptocurrency remains well supported for a possible bounce back above the $43,800 support level.

Bitcoin pullback

ETHUSD bulls are also on the defensive for a third consecutive day, with the pair at risk of breaking below the $3,000 support level.