The US dollar turned to the upside on Monday. Let's discuss what to expect next from the market.
Will sentiment remain risk-on on Monday?
Riskier assets and gold ended last week with huge gains due to the weak US dollar’s performance. Let’s discuss what will drive the markets today.
- Hopes of the additional fiscal stimulus package improved the market sentiment. US President Donald Trump pledged to unveil a $1.8 trillion in form of individual checks and also an extension of the Paycheck Protection Program.
- Joe Biden is leading an election competition as he has 12 points more than Donald Trump in a national poll. Investors have been encouraged by this news as Biden is going to impose a larger fiscal stimulus package.
- Today is the national holiday in both the USA and Canada, that’s why the market volatility may be slightly reduced.
- As for Brexit, last week hasn’t shown any progress in the UK-EU deal. UK Prime Minister claimed that the agreement should be reached before October 15, otherwise he is going to leave negotiations. Anyway, the British pound keeps rallying amid the risk-on mood.
- Crude oil prices surged, driven by the combination of factors such as improved market sentiment, the strike in Norway, and the hurricane Delta in the Gulf of Mexico.
EUR/USD has broken through the 50.0% Fibonacci retracement level of 1.1810. After a short selling, the pair is likely to rise further to the 61.8% Fibo level of 1.1860. If it manages to cross this level, it will jump to the key psychological mark of 1.1900. On the flip side, if it falls below the area of 1.1800-1.8100, the doors towards the 38.2% Fibo level of 1.1765 will be open.
S&P 500 is edging higher by the risk-on sentiment. Elsewhere, the 50-period moving average crosses the 200-period MA bottom up, forming a golden cross, which is a bullish signal. It has just crossed the resistance of 3 480, clearing the way towards the high of August 31 at 3 525. Once it closes above this level, it may jump to the all-time peak of 3 580. In the opposite scenario, the move below 3 445 will push the stock index to the 200-period MA of 3 390.
XAU/USD has broken through the two-month trendline, revealing its intention to keep rallying further. If gold rises to the 50-day moving average of $1 940, it may rise to the high of September 16 of $1 960. Support levels are $1 915 and $1 900.
The British pound is climbing up. The move above the 50.0% Fibonacci retracement level of 1.3080 will drive the price to the 61.8% Fibo level of 1.3175. On the flip side, the move below the area of 1.2980-1.3000 will push the price to the 23.6% Fibo level of 1.2870.
Follow the speech of the BoE’s governor Bailey. The more optimistic he will be about the UK economic recovery – the better for the pound.
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.