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%

FTSI 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 4:30 PM (UAE time) and will tune in the ECB president Lagarde’s speech at 5:00 PM, then the Fed Chair Powell will speak at 6:40 PM, and the Fed member Harker will speak at 8:00 PM.

The information presented herein is prepared by Mahmoud Alkudsi and does not intend to constitute Investment Advice. The information herein is provided as a general marketing communication for information purposes only.

Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research.

Key Way Markets Ltd does not influence nor has any input in formulating the information contained herein. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.

Therefore, Key Way Markets Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance is not a reliable indicator of future results.