Does oil decline calm the market?
While today U.S. treasury selling 20-Year Bonds, earlier the U.S. tressured 10-year Yield raised to 1.66%. Same as the U.S., European yields also continue to rise as supply continued to come to market. German Germany 10 Year Government Bond yields climbed to -0.0955, while Italy's 10 Year Government Bond yields rose to 1.125%.
According to the U.S. published PPI of last week and Chinese PPI and CPI data published earlier this week, market participants' fears of rising inflation are getting more serious. Just add them today's British and E.Z. numbers, then this fear will be more palpable.
U.K. producer inflation (PPI), rising at its fastest rate in the past nine years, even if consumer prices (CPI) rose only 1.5% the yearly base, and below the Bank of England's target, PPI says that following CPI numbers supposed to be higher, as producers will increase their sell prices. Eurozone consumer prices also came lower than expectations. Still, South Africa's and Canadian numbers overshot. After publishing the CPI number in Canad, the first G7 member who started tightening monetary policy with lower bound purchasing showed that BoC members were right to go that way. Their CPI in April rose by 0.5%, higher than 0.4% expectations.
On the other hand, WTI and generally energy price is falling. WTI returned to 63.50, the same level that it started the May, while yesterday could test the $70. Lower energy price will reduce the producer price and inflation which again will end where FOMC member is expecting to finish, lower CPI in subsequent months. If it happens, then the FED outlook that says higher than target inflation will be short-lived and under control will be realized. But for this scenario, we need to see the Oil price under $63.
Market Reaction:
USVIX index rose again higher, above 24, from yesterday's low of 21. signaling that market risk is rising. In the currency market, commodity-based currencies had the worse performance. Kiwi and Aussie, both falling by 0.8% and 0.6%. Canadian loonie is also trading 0.25% lower.
EURUSD in the H1 chart and intraday trading time-frames fell under the trend line, both in the price chart and OBV trend line. However, it is still trading above pivot Point (1.2200), and as long as it is holding above this level, the following targets are sitting at 1.2255 and 1.2290, as the first and second resistance. Below this level will open the doors for 1.2165 and 1.2100. For longer time-frames, the downtrend of paring needs to breach under the critical level of 1.2100
