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EUR/USD Price Rebounds on Improved Risk-on Sentiment

EUR/USD Price Rebounds on Improved Risk-on Sentiment

The risk on Sentiment recovers slightly sending stocks higher and the US dollar lower. What moves the indices, FX, and commodities markets today?

Equities

US stock markets re-cooped on Monday some losses as US legislators near an agreement on the delayed fiscal stimulus package. However, investors still have too many reasons to worry due to Covid-19 surging numbers and the US elections uncertainty. Trump and Biden will have their first presidential debate on Wednesday at 1:00 AM (GMT).

The Democrats and Republican’s battle is not only on the first office in the united states but on getting the majority in the Senate and the House. A Democratic Congress with a Republican president or the other way around would not be the desired result for markets.

The house speaker Nancy Pelosi proposed a compromising deal of $2.2 trillion relief package however, it is not clear yet whether the deal will pass through as it is, or republicans will ask for more cost’s trimming. It is worth noting that, republicans suggested a $1.3 trillion package, while the Democrats asked for $3.4 trillion.

Stock Market

Change %

S&P 500

+2.0%

Dow Jones

+1.8%

NASDQ

+2.5%

Japan 225

+0.6%

DAX 30

+2.7%

FTSE 100

+1.3%

CAC 40

+1.8%

Currencies

A better risk-on sentiment paused the US dollar’s rally on Monday and led the US Dollar index to close in the red for the first time in nearly two weeks. Nonetheless, the technical outlook remains positive while above 94.04.

The EUR/USD found support on Monday around the previously discussed 1.1621 level. Currently, the pair eyes testing the resistance located at 1.1713. A daily close above that resistance would change the technical outlook to neutral, while a daily close below 1.1621 may send the pair even lower towards 1.1459.

GBP/USD reversed on Monday to the higher trading zone 1.2773 – 1.3048 and signaled a weaker bearish sentiment therefore, the price could pursue testing the high end of the zone.

Commodities

The oil price stabilized on Monday due to a better risk-on sentiment. Today, Brent oil has found support around $42.50, while the US Crude remained above $40 a barrel. That said, oil fundamentals are still weak as concerns of lower global demand weigh on investor's sentiment.

Gold price regained some territory on Monday due to a softer US dollar and steadied in the current trading zone $1,861 - $1,921. Thus, the price could be on the way for a test of the high end of the zone.

Looking Ahead

Markets expect the Eurozone consumer confidence index final read for September at 11:00 AM (GMT) and the German inflation rates at 1:00 PM, then-Fed members Williams and Harker speak at 2:15 PM and 2:30 PM respectively. At 3:00 PM eyes will be on the US consumer confidence index numbers for September and at 6:00 Fed Williams delivers a second speech.


This information/research prepared by Mahmoud Alkudsi does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk. The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest. The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.