Pre-Asian Trading Session Update
The dollar traded fairly quiet during the European trading session, however, picked up significant moment towards the end of the US trading session. Initially, the index spiked higher reaching a session high at around 93.34, however, this was short-lived and prices completely reversed this move, falling the key 93.0 support level. This move came as comments surrounding the FED’s potential approach to inflation ahead of tomorrows conference could cause significant harm to end consumers. Comments from FED members around the uncertain outlook of the US economy also added to the bearish rhetoric. The DXY has now tested the 93.30 resistance three times and failed to break above, price action suggests a further impulse down towards the previous lows at around 92.60
Many have called the top in EUR/USD, with analysts citing that the current FX rates do not reflect the value of the Euro, however positive European consumer data has supported prices and remain supported against the likes of the US economy which is not fairing as well. Weakness in the dollar index is helping to keep the pair supported, should the FED issue a dovish approach during tomorrows event, there could be a good possibility this pair can finally hit the 1.2 level.
Equities have gained a decent bid, mostly due to optimism around a COVID-19 vaccine being realised in early 2021 and a long term environment where interest rates remain low, longer than expected. Tech stocks, as usual, have taken the reigns in terms of gains with Salesforce shares posting a 20.6% gain on the day, however, this is to be expected with a more technology-focused society – due to the implications of COVID-19. In fact, many companies are now making working from a home a permanent routine, where employees only need to come into the office on select days- or not at all. As a result, the reliance on using technology platforms is significantly higher, thus supporting tech stocks.
Gold has behaved very buoyant over the past few days, slipping almost $100 an ounce over a few days alone, though this correction was probably needed after such an extensive upside rally, the rate of retracement is certainly a force to not reckon with. After initially breaking below a key support at 1910, on the back end of dollar strength (as explained in the DXY section above), prices reversed as fears over the FED’s potential strategy on leaving inflation unchecked caused concern, backed by dollar weakness. Should Powell back these worries in tomorrows key event, gold prices could most definitely see a case back towards the 2080 highs. Though the opposite, i.e a less dovish Powell, could see a violent retracement potentially back down to the 1800 level.
Crude Oil remains fairly unimpressed in today’s trading session, despite better than expected inventory levels, indicating better demand and consequently, consumption of oil. Prices are still moving in a manner which is non committed, perhaps until we have another catalyst, possible with OPEC supply cuts. A key resistance to watch out for is $45 per bbl, where we may witness more volatile movements.