The US dollar turned to the upside on Monday. Let's discuss what to expect next from the market.
Stock surged, but halt of vaccine trials may kill investor's mood
Stock significantly surged: S&P 500 and Nasdaq reached 6-week highs as investors were optimistic about the prospects for the additional fiscal stimulus. However, according to Bloomberg, we shouldn’t expect any action this week. There is the earnings season in the USA, and also Amazon is getting ready for its Prime Day, while Apple is going to launch soon its cutting-edge iPhone with the 5G technology.
S&P 500 has jumped above August’s high of 3 525, but then retested it again. If it manages to close above it again, it may rise to the high of September 1 at 3 555. On the flip side, the move below the key psychological mark of 3 500 will drive the stock index to the next support of 3 470.
The US dollar closed in red yesterday, but today turned to the upside. The market sentiment may deteriorate today as Johnson & Johnson’s Covid-19 vaccine trails have been stopped because of the unexplained illness. Since the global economic recovery depends directly on virus control, the trial halt may kill an investor’s mood. Elsewhere, the US election is getting closer and uncertainty over it adds some risk-averse to the market as well.
EUR/USD has broken down the significant level of 1.1800. Now we can observe a decisive moment: whether sellers will be strong enough to push the price below the 200-period moving average and the lower trendline. If yes, the pair will fall to the 38.2% Fibonacci retracement level of 1.1765. In the opposite scenario, the move above the 50% Fibo level of 1.1810 will drive it to the highs of late August at 1.1840.
Moving on, the Bank of England asked banks about their readiness for negative rates. It showed that the BoE is looking for a way to support the economy, but isn’t confident how to do that. However, the BoE’s governor emphasized that they aren’t going to impose negative rates now. This morning the British labor data came out much better than expected. Only 28 100 British filed for unemployment benefits, while 78 800 were anticipated.
The pound keeps rallying. GBP/USD has entered the ascending channel. The move above the 50.0% Fibonacci retracement level of 1.3080 will push the pair to the 61.8% Fibo level of 1.3175. In the opposite scenario, if the pound drops below the key support zone of 1.2980 - 1.3000, the way to 1.2900 will be open.
Finally, let’s talk about commodities. Oil prices sharply slumped as workers are back to work in the Gulf of Mexico after the strong hurricane Delta, and also Libya is planning to reopen its largest oilfield. As for gold, it is edging lower. If it manages to break through the strong support of $1 915, it will fall to the key psychological mark of $1 900. However, look at its previous performance, XAU/USD has failed to cross this level many times, so perhaps, this time will happen the same. The move above the 50-day moving average of $1 940 will push the price higher to $1 960.
Follow US Core Consumer Price Index at 15:30 MT time!
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.