Risk sentiment was more bellicose in European trading on Tuesday, with European stocks clawing back an earlier 1 percent loss and already trading higher, and U.S. index futures also rising modestly. In currency markets, the DOLLAR continued its slide, breaking below key support of 92.50 at one point to as low as 92.47 and now back around 92.55. Overall, support for 92.50 is relatively strong. The euro peaked at 1.1915; The highest was 1.3180; The yen hit as high as 105.39. Spot gold continued to rally sharply today, reaching as high as $2, 99.95 an ounce, having recouped most of its August 11 losses. Analysts believe gold could soon see a more significant break as the Federal Reserve makes a big statement. In terms of news, the market is facing the quadrennial CONGRESS of the US Congress, the grim situation of the global COVID-19 epidemic, the stimulus bill of both parties in the US Congress, and the situation in China and the US, and many other uncertainties, which are bound to trigger violent fluctuations.
European and American market: European city in early trading today, European stocks opened lower, and fell rapidly expanding, the main stock market decline are close to or more than 1%, then all reversed losses, by the time the main stock index gains are super continues to expand, the German dax index, the ftse 100 index, the French CAC40, Italy’s ftse MIB index, the stoxx Europe 600 index were up 0.7%, 0.4%, 0.5%, 0.8%, 0.4%. U.S. stock futures, similar to those in Europe, are also trading higher. Dow, S&P 500, Nasdaq and Russell 2000 futures rose 0.2%, 0.3%, 0.3% and 0.2%, respectively.
“Investors are still waiting for the second stimulus package in the U.S.,” Said Naeem Aslam, chief market analyst at Avatrade, according to Yahoo Finance. A lot of money is waiting on the sidelines. Investors believe that the moment we get the next stimulus package, the coronavirus-induced stock market rally will get another push. Otherwise, it’s likely to stay dull.”
Nationwide’s head of investment research, Mark Hackett, said in a note, CNBC reported. The market lacks catalysts to help overcome technical resistance.”
With the S&P 500 having its best 100-day run in history, optimistic assumptions about economic recovery and fiscal stimulus are being made. These factors require unexpected news to push the market sharply higher.
The S&P 500 has rallied more than 50 per cent from its March bottom on the back of massive government fiscal stimulus and better-than-feared corporate earnings. The tech-heavy Nasdaq Composite index set a new closing record and intraday high in trading Monday, taking its gains for 2020 to 24%.
Markets have been stuck in a tight range as Congress refuses to break the impasse and hopes for a new coronavirus stimulus look slim. Democrats and Republicans will hold their nominating conventions this week and next.
Meanwhile, tensions between the U.S. and China continue to keep investors on edge. On Monday, the Trump administration announced it would further tighten restrictions on Huawei in an effort to crack down on the Chinese telecommunications giant’s access to commercial chips.
In the foreign exchange market, as the DOLLAR suffered a comprehensive sell-off, The Euro, sterling and other G10 currencies took the opportunity to continue to rebound, and gold, silver and other major forces to counterattack…
In response to the dollar’s moves, FX168 earlier reported that the dollar index fell for a fifth straight session and opened the door to further weakness, potentially breaking below its previous key support level of 92.50.
In fact, investors continue to favor riskier assets over the next trading day, putting additional selling pressure on the dollar. From the political scene in the United States, the Democratic National Convention begins on Monday with President Trump’s mishandling of the coronavirus crisis at the center of the debate. And there has been no progress on another fiscal stimulus.
Technically, if the dollar falls below 92.50, then the next support level is 91.80 and then 89.23. On the other hand, a break above 93.99 will see 94.20(38.2% of 2017-2018 Fibonacci retracements) followed by 96.03(50% of 2017-2018 Fibonacci retractions).
Notably, Business Insider reports that hedge funds are shorting and shorting the dollar for the first time since May 2018, the latest sign that the world’s largest reserve currency is falling further and is unlikely to rebound anytime soon. It also points to heavy dollar selling, which is expected to continue to support dollar-denominated commodities as well as non-U.S. currencies.
Gold: FX168 quoted FXStreet analyst Dhwani Mehta as saying gold would continue to receive broad dollar support amid falling Treasury yields and market jitters ahead of the Fed minutes.
After passing the 2000 mark, gold could test the August 11 high of $2,030. A sustained break above the $2,050 level is crucial for buyers to break the all-time high of $2,075 again. This level is where the Aug. 10 high meets the psychological level.
AxiCorp market strategist Stephen Innes noted that the market is focused on the Fed’s view on controlling the yield curve, as well as its view on inflation, which is bad for the dollar and good for gold. “The Fed minutes will be a key factor in whether gold can sustain the $2,000 an ounce level.”
Ubs said spot gold’s renewed strength was partly due to renewed weakness in the DOLLAR index, as investors cut their dollar holdings amid policy uncertainty caused by the US election.
At the same time, against the backdrop of continued outbreaks in many parts of the world and persistent geopolitical risks, investor demand for safe-haven assets remains high, which has continued the gold rally. For now, UBS expects gold to have plenty of further upside. A move to $2,300 by the end of the year cannot be ruled out.
Why is gold going to break even more soon?
Persistent dollar weakness, uncertainties about the global economic recovery, unprecedented easing of monetary and fiscal stimulus around the world, and ETF buying have all contributed to gold’s rally. Although it has suffered a very large and rapid correction, analysts believe gold could soon be heading for a much bigger break as the Fed…
The Federal Reserve will soon reveal how it intends to make small but far-reaching changes to US monetary policy, or formally announce a looser view on inflation, a combination of media reports suggests.
In addition to helping save the U.S. economy during the epidemic, Federal Reserve Chairman Jerome Powell and his colleagues will complete the first-ever review of the two-pillar monetary policy goal by 2020. The process began in early 2019 and included a nationwide “Fed Listening” tour. Now they are about to publish the results, perhaps as soon as September.
“It will send a clear signal to the market that the Fed not only tolerates inflation above 2 percent for the time being, but is in favor of it and will work toward it,” said Mickey Levy, chief U.S. and Asia economist at Berenberg Capital Markets in Chicago.
Several other economists interviewed made exactly the same prediction and agreed that many Fed officials have been pursuing this strategy for months. Investors are expecting the same.
The U.S. “The rise in inflation expectations is partly a sign that the market is starting to anticipate a fed shift,” said Bill Merz, senior portfolio strategist and head of fixed income research at Bank Wealth Management in New York.
More details about when and how the Fed will complete its review may be revealed this week in the minutes of the Fed’s July 28-29 Federal Open Market Committee meeting. Changes in the way the Fed controls inflation may sound trivial, but they are significant.