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Risk-on sentiment sends EUR/USD Higher, What’s Next?

Risk-on sentiment sends EUR/USD Higher, What’s Next?

Risk-on sentiment sends equities higher and the US Dollar lower, what moves FX, indices, and commodities markets today?

The RBA decided to maintain the current policy settings, including interest rates, the yield on 3-year Australian Government bonds, and the parameters for the expanded Term Funding Facility, despite growing concerns over the increasing numbers of the Coronavirus worldwide.

According to the RBA governor, the global economy recovers gradually from the negative effects of the pandemic however, the recovery’s continuation will depend on the containment of the virus.

Equities

Investor’s sentiment improved on the news of US President Trump was discharged from the hospital following treatment from Coronavirus, as a result, global stock markets rallied and closed in the green on Monday.

Pressures are building on both parties to approve a stimulus package before the election’s day on November 3. Democrats dropped a $3.4 trillion proposal and settled at $2.2 trillion, while Republicans increased their proposal from $1.3 trillion to $1.6 trillion. Despite the progress announced from the House speaker Pelosi on Sunday, it is unlikely to see a deal next week as the Congress will be out until October 19.

Stock Market

Change %

S&P 500

+1.5%

Dow Jones

+1.6%

NASDQ

+1.8%

Japan 225

+0.8%

DAX 30

+1.1%

FTSE 100

+0.8%

CAC 40

+1.0%


Currencies

The US Dollar retreated on a better risk appetite caused by discharging President Trump from the hospital. The US Dollar index remained below 94.04 eying a test of the 50-day moving average. A close below this level could send the price even lower towards 91.78.

The EUR/USD rose on Monday to a two-week high at 1.1796. The price may rally towards 1.1909 while above 1.1713.

The GBP/USD benefited from a weaker US dollar and tested on Tuesday the 1.3000 threshold for the first time in three weeks. A failure in closing above 1.3048 could reverse the pair’s direction towards 1.2773.


Commodities

The oil price rose on better risk-on sentiment combined with news of a possible storm mat take place in the Gulf of Mexico and put production on hold. Additionally, lower supply from the strike in Norway that may reduce the country’s production by equivalent of 8% of total production, as per Norwegian oil and gas association.

The Brent oil closed above $39.60 eyeing a test of $42.50. a close above that level may send the price even higher towards $45.15. On the other hand, the US Crude could rally towards $42.23 while above $36.32.

The Gold price benefited from the US dollar weakness and rose on Monday to a near two-week high at $1,918. A failure in closing above $1,921 could reverse XAU/USD price towards $1,861.

Looking Ahead

Eyes will be on the US and Canadian Balance trade numbers of August at 1:30 AM (GMT) and will tune in the ECB president Lagarde’s speech at 9:35 AM, then the Fed Chair Powell will speak at 3:40 PM and the Fed member Harker will speak at 4:45 PM.


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.