Global equity bulls may continue their unstoppable momentum this week as investors weigh expectations for another U.S stimulus package against the coronavirus menace.
(Source: bloomberg terminal)
Market speculation around the Federal Reserve reinforcing its dovish message in the face of US-China tensions, mixed economic data and rising coronavirus cases provide an argument for stock markets to push higher in the near term. While stimulus hopes and low-interest rates are empowering equity bulls, the million-dollar question is for how long?
(S&P 500 weekly timeframe)
The explosive movements witnessed across currency and commodity markets over the past few weeks continue to highlight how global sentiment remains fragile to coronavirus developments. Looking at the Chicago Board Options Exchange's CBOE Volatility Index (VIX) which is a measure used to track volatility on the S&P 500, it has declined over the past few days. However, there could be a rise VIX ‘fear-gauge’ this week if earnings disappoint and US-China tensions mount.
Equity bears still have enough ammunition to make an unwelcome return should global growth concerns and rising coronavirus cases among many other negative themes rekindle risk aversion.
Dollar in the dumps…
There was no love for the Dollar yesterday as sharp increases in US coronavirus cases rattled investor confidence. The once mighty Dollar has depreciated against every single G10 currency since the start of Q3 and is currently trading at levels not seen in two-years below 93.80!
Looking at the technical picture, prices are heavily bearish on the daily charts as there have been consistently lower lows and lower highs. Sustained weakness below 94.00 may encourage a decline back towards 93.50 and 93.00, respectively. If prices can break above 94.00, then a technical bounce back towards 94.40 and 94.70 could be on the cards.
EURUSD sprints to multi-year high
Euro bulls wasted no time in exploiting the Dollar’s weakness to propel prices to levels not seen since September 2018 above 1.1760.
Over the past two weeks, the currency pair has jumped over 400 pips thanks to renewed buying sentiment towards the Euro and a depressed US Dollar. While prices have the potential to push higher once the 1.1760 level is conquered, a technical correction could be around the corner. If 1.1760 proves to be reliable resistance, the EURUSD is likely to retrace back towards 1.1670 – 1.1620 regions before rebounding higher.
GBPUSD slams into 1.2900
The technical picture on the GBPUSD is bullish. A solid daily close above 1.2900 could open the gates towards 1.3000. Alternatively, a technical correction from the 1.2900 resistance is seen triggering a decline back towards 1.2813 and 1.2700, respectively.
Gold remains the star of the show
Gold rallied a fresh all-time high above $1980 on Tuesday before tumbling back below $1950 as investors engaged in a bout of profit taking.
The precious metal has gained almost 10% since the start of Q3 and is up over 27% year-to-date! While the medium to longer-term outlook for Gold remains tilted to the upside, losses could be witnessed in the short term amid profit taking and price action.
Looking at the technical picture, a close below the $1932 level could trigger a decline back towards $1905.