In European markets on Wednesday, the euro traded around $1.2060. GBP/USD fluctuated sharply, briefly dropping 100 points to a day low of 1.3337; The dollar index rebounded, falling as low as 91.11 earlier. Spot gold continued to rebound, rising as high as $1, 831.69 an ounce and gaining as much as $20 more.
On the news side, progress on the global COVID-19 vaccine continues to boost risk sentiment, which in turn has weighed on the dollar. On the us-China situation, US media reported that Biden said that the first phase of the trade agreement with China will not be withdrawn immediately. In addition, the Brexit negotiations are in their final stages, with no deal still in place, which could cause a market shock. Investors focused on U.S. small farms today.
The euro: On current trends, the euro has gained even more against the dollar, rising above $1.20 on Tuesday, its biggest one-day gain in nearly nine months. The last time the euro had its biggest one-day gain against the dollar was March 26.
The euro closed above $1.20, ending a three-month correction in a choppy range between $1.16 and $1.20, before resuming gains around the March low of $1.06. The rise in the euro came at a December 10 MEETING of the European Central Bank, signaling further monetary easing by ECB policymakers, so it is worth watching.
The dollar remains bearish, which appears to be boosting the euro against the dollar. The DOLLAR is on the defensive and may continue to fall before Christmas as the global economy fully recovers on the positive news from the Novel Coronavirus vaccine.
Markets are also betting that under President-elect Joe Biden, tensions with China will ease. Separately, In the New York Times, Biden called on Congress to pass a substantial rescue plan to help businesses, families and local governments make ends meet. The news reignited expectations of further fiscal stimulus in the United States, depressing the dollar.
Sterling: The pound plunged more than 100 points to its lowest level against the DOLLAR in 10 minutes on Wednesday afternoon (Hong Kong time) after The European Union’s chief Brexit negotiator Michel Barnier said there might not be a post-Brexit deal.
Barnier told the EU envoy that three major issues remain unresolved and the agreement is pending. Britain’s Cabinet Office minister Michael Gove also said Tuesday that talks on a trade deal with the EU remain stuck on fisheries, dispute settlement and governance rules because the EU wants too much.
Later, EU diplomats said it was still unclear whether negotiators could bridge differences on three key issues. The briefing by Michel Barnier, the EU’s chief Brexit negotiator, was designed to reassure eu countries that He will continue to defend the BLOC’s core interests, including fisheries.
The pound also hit 1.34 on Tuesday as the dollar fell, but today’s news wiped out more than half of yesterday’s gains. Volatility is set to intensify in the final stages of the Brexit negotiations: ING strategists say the bearish news will lead to sharp intraday swings in sterling in the coming days.
In addition, the United Kingdom has become the first country to approve the use of The Pfizer-Biontech COVID-19 vaccine, according to media reports. Albert Bourla, Chairman and chief executive of Pfizer, said the mandate from the UK Medicines and Healthcare Products Regulatory Agency (MHRA) was a “historic moment”. That could also give some support to sterling bulls!
Dollar index: In dollar terms, the DOLLAR index is trying to stabilize after falling to a new low of 91.10 in 2020 on Tuesday, last tested in April 2019. After bottoming out in the 91.10 region or new 2020 lows, the DOLLAR index managed to gain some buying interest, returning to the 91.30/40 region in early European trading on Wednesday.
Meanwhile, the novel Coronavirus vaccine is expected to be released in the coming months, boosting optimism and keeping the dollar under pressure. As has been noted before, the clarity of the U.S. political situation and positive vaccine news and improved growth prospects have led to improved risk appetite sentiment, which has weighed on the dollar.
Technically, on the upside, a break above 92.80 would open the door to 93.20 and 93.24 (100-day SMA). On the other hand, the next support is at 91.10, then 89.22 and 88.94.
Spot gold: Gold extended its rally from a five-month low of $1,765 today as bulls tested an earlier key support (now turning to resistance) of $1,850.
Technical indicators are bullish as gold is now confirmed to be above the bullish pennant shape on the hour-long chart. One-hour chart gold closed above downtrend resistance at $1815 confirming a break. Gold broke through its 200-hour moving average of $1,819, giving bulls additional momentum.