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EUR/USD, Gold May Surge as the US Dollar Shows Weakness

EUR/USD, Gold May Surge as the US Dollar Shows Weakness

Equities retreated on fading hopes of passing the US stimulus bill before the US elections, while markets gear up for the final presidential debate this week.

Equities

Most global stock markets traded lower on Monday as Republicans and Democrats showed no signals of an imminent deal about the fiscal stimulus. The current political division makes passing the long-waited bill most likely after the US election.

Markets will follow the Trump vs. Biden presidential debate at Belmont University in Nashville, on Thursday 9:00 PM US Eastern time, Friday 5:00 AM UAE time. Topics like the coronavirus combating, and national security will be on the debate’s agenda.

Federal Reserve’s officials stressed on the direct relationship between Federal spending and the US economic recovery, as more delay in passing the fiscal stimulus bill will slow down the economic growth.

Stock Market

Change %

S&P 500

-0.7%

Dow Jones

-0.7%

NASDQ

-0.7%

Japan 225

+0.2%

DAX 30

-0.8%

FTSE 100

-0.7%

CAC 40

+0.06%

EUR/USD and Main FX Markets

The current delay in passing the US stimulus package could lead the Fed to ease its monetary policy further and put the greenback under new pressures. Technically, the US Dollar index created a lower high at 93.90 and failed to test 94.04 highlighting bull’s weakness. Therefore, the price could be on the way for a test of 91.78.

By the end of last week, the EUR/USD rebounded around 1.1713 then rallied on Monday and rebounded from the 50-day moving average. A break above the October 9 high at 1.1830 generates a positive signal and may send the price even higher towards 1.1909.

The British Pound rallied on Monday on news of the UK government may ease its negotiating stance, especially the controversial internal market low. This development spark hopes that an EU/UK free trade could be achieved by next month. Technically, the GBP/USD rebounded around the 50-day average, eyeing a test of 1.2773.

Gold and Oil

Concerns of COVID-19 increasing cases in the US and Europe combined with the growing Libyan output weighed on oil prices. From a technical point of view, On October 15, the Brent Crude failed to end its sideways move as created a lower high at $43.45. On Monday, the price slipped by 0.7% and closed below $42.50. Hence, a break below the October 12 low at $41.34 produces a negative signal and could send the price even lower towards $39.60.

The Gold stabilized last week below $1,921. That said, a break above the October 12 high at $1,931 would change the outlook of the precious metal to bullish.

Looking Ahead

Not much on the economic calendar, EUR/USD and Gold traders will find out about the US housing starts of September at 1:30 PM (GMT) then-Fed members Quarles and Evans will speak at 3:50 PM and 6:00 PM, respectively.

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.