In European trading on Thursday, the DOLLAR index rebounded to as high as 92.67. The euro came under pressure against the dollar, falling as low as 1.1858. Sterling fell more against the DOLLAR, as low as 1.3204, near the 1.32 mark; Spot gold fell more than $10 to as low as $1, 854.96 an ounce.
On the news side, the severe global COVID-19 epidemic has seriously impacted the market’s confidence in the economic recovery, which has also led to the rising expectations of the central bank for a new round of easing. In the European Union, the recovery fund will be the focus of the markets. Negotiations over Britain’s exit from the European Union have also affected the pound. Events such as the US election could also hit investor sentiment…
Euro: In terms of direction, the euro’s upward momentum slowed further, pushing the euro to a three-day low of 1.1820 against the DOLLAR today. The euro/dollar fell further in the 1.1830 area on Wednesday after comments from ECB President Christine Lagarde.
Earlier in the day, European Central Bank President Christine Lagarde said the situation continued to be difficult. The renewed surge in COVID-19 cases is particularly weighing on the services sector; The eurozone economy as a whole will be affected by the surge in cases.
European policymakers must continue to help the economy. The emergency Debt purchase programme (PEPP) and targeted Long-term Refinancing Operation (TLTRO) will continue to be the main tools. The key challenge for policymakers will be to bridge the gap between vaccine maturity and a self-sustaining recovery.
Ms Lagarde said uncertainty remained high because of the global rise in coVID-19 cases. An enforceable EU spending package must be introduced without delay and the ECB will act forcefully to support the eurozone economy.
Today, all eyes will be on the European Council’s videoconference, where the EU recovery fund is expected to be at the top of the agenda, mainly after a possible veto by Hungary and Poland.
On a technical level, eur/USD once again failed to revisit the psychological 1.1900 level, with the next support level now at 1.1745, followed by 1.1709(Fibonacci retracement of 2017-2018 gains) and finally 1.1602. On the upside, a break above 1.1920 will be seen in 1.1965 and eventually 1.2011.
Sterling: On the news, the pound suffered as The Times sparked news of no deal to leave the European Union. Overall, however, traders are cautious about today’s EU summit.
As The Times notes, UK policymakers remain cautiously optimistic in their latest comments, in spite of disappointment over brexit discussions in key EU members such as France, Belgium and the Netherlands. While Brexit is likely to be discussed at an EU summit on Friday, any early signals will be key for sterling/dollar traders.
Technically, GBP/USD has yet to confirm a downside breakout in the short-term uptrend triangle despite the recent sell-off. Further selling would therefore need to be well below 1.3220, with the next target being around the 100 moving average and mid-November low of 1.3105/3100.
In the 4-hour chart, short-term support for GBP/USD is at a rising 50SMA of 1.3211, with a break testing the weekly low of 1.3106. In contrast, the exchange rate needs to close above 21SMA 1.3240 in the 4-hour chart to establish rebound momentum. The next upside target is 1.3313 (Nov.11 and Nov.18 highs).
Analysts at UBS said they expected a “meaningful rebound” in sterling after the final UK-EU deal was signed, as market participants still appeared unprepared for the possibility, despite the pound’s gradual rise since September.
Dollar index: Analysts pointed out that overnight trading, market fears of coVID-19 countries will introduce blockade, selling U.S. stocks, risk sentiment weakened.
The world Health Organization’s director, John Ryan, said the vaccine would be available in large quantities within four to six months, forcing investors to temper their optimism and start to worry about an economic slowdown.
While risk aversion supported a rally in the dollar, it was tempered by the belief that the Federal Reserve would step up stimulus measures to make up for the shortfall in US fiscal policy…
Analysts at TD Securities expect the dollar index to post a retaliatory bounce of up to 2 percent in a relatively short period of time once the U.S. election results are finally settled and the current political uncertainty is removed.
Spot gold: There was a clear sell-off in gold prices today. Technically, RSI is weak, but it has not yet hit an oversold gold price drop, with short sellers now targeting a monthly low of $1,850. If confirmed, the shorts could challenge the early July low of $1,818.
If gold rebound correction break through short-term resistance $1873, if further rise, focus on the 200SMA average of $1899. Looking upward, a break above $1,899 would require confirmation from the round number at $1,900 to point to a monthly high of $1,965.