The US dollar turned to the upside on Monday. Let's discuss what to expect next from the market.
Main market movements on September 22
The market sentiment remains risk-off amid rising virus cases around the world and fears over new restrictions and lockdowns. Forecast for the increased volatility around the US presidential election deteriorated investor’s mood as well. Therefore, safe-haven currencies such as the USD and the JPY got a boost, while riskier assets are dipping. The USD is also on the rise due to the uncertainty over the US fiscal stimulus. Moreover, US-China tensions are escalating as Beijing is not going to allow Oracle to buy TikTok’s US assets.
Long story short, all the issues point that today the risk-off sentiment will prevail. However, the situation may change with the statement of Fed’s chairman Jerome Powell. According to Monday’s speech, the economy is strengthening, but the way to the full recovery will be long. He emphasized that while many economic indicators were upbeat, employment and economic activity have been still at low levels, and it won’t get better without additional government support measures.
Let’s look at the charts. EUR/USD has just broken down the support of 1.1755 and moving further down. The next support is at the key psychological mark of 1.1700. This level should constrain the pair from dipping as it has failed to break it for almost 2 months. However, if it manages to cross it, it may fall to the next round number at 1.1650. Resistance levels are 1.1800 and 1.1880.
S&P 500 has reached levels unseen since July 30. If it manages to break through the key support of 3 250, it may fall deeper to the next support of 3 200. The move above yesterday’s high of 3 320 will drive the stock index higher to 3 370.
Gold has bounced off the significant support of $1 900. However, if it breaks it down, it will fall to the next support of $1 880. Resistance levels are $1 940 and $1 960.
Finally, let’s discuss one representative of riskier assets: the Australian dollar. It has just gone through the significant support of 0.7200. Therefore, it’s likely to keep falling until it reaches late August lows at 0.7150. The move below will drive the aussie to 0.7115. Resistance levels are 0.7270 and 0.7335.
Three main drivers of the market: the stimulus package, the US presidential election and the coronavirus. Let's look how market reacts.
EU Flash Manufacturing & Services PMI will come out on Friday at 11:00 MT time!
The focus of traders’ attention shifted from Brexit and the US stimulus to the coronavirus . The WHO claimed that Europe become the new Covid-19 epicenter.
Canada will publish the monthly GDP growth on October 30 at 14:30 MT time.
The European Central Bank publishes the monetary policy statement alongside with an update on the interest rate on October 29, at 14:45 MT time.