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Dollar Edges Higher. But Underlying Direction is South By Investing.com

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© Reuters.

By Peter Nurse

Investing.com – The dollar edged higher in early European trade Tuesday, gaining some ground as the more risk-averse sought a safe haven following news of Johnson & Johnson’s setback with its Covid-19 vaccine candidate.

At 2:55 AM ET (0655 GMT), the , which tracks the greenback against a basket of six other currencies, was up just 0.1% at 93.227, regaining a little ground after falling Friday to a three-week low of 92.997. 

Elsewhere, dropped 0.2% to 1.1785, was up 0.1% at 105.37, while the risk-sensitive fell 0.4% to 0.7179.

Johnson & Johnson (NYSE:) said late Monday it had temporarily paused its Covid-19 vaccine candidate clinical trials due to an unexplained illness in a study participant, delaying one of the highest profile efforts to contain the global pandemic. 

In September, rival AstraZeneca (NYSE:) paused late-stage trials of its experimental coronavirus vaccine, developed with the University of Oxford, also due to an unexplained illness. While trials in the U.K., and elsewhere, have resumed, the U.S. trial is still on hold pending a regulatory review.

That said, the dollar gains are small and the overall tone remains positive for risk as polls are tending to suggest a clear-cut presidential election victory for Democrat candidate Joe Biden. The market is expecting this to result in a large stimulus to shore up a pandemic-hit economy.

“Supporting risk assets and pressuring the dollar seem to be hopes for fresh U.S. fiscal stimulus and investors settling into a view that the Presidential election outcome will not be contested,” said analysts at ING, in a research note.

“We don’t expect these views to be challenged too harshly in the week ahead since the second Presidential TV debate looks to be delayed and neither party in Congress wants to be seen killing stimulus prospects.”

Elsewhere, traded 0.2% lower at 1.3041, still above the key 1.30 level as hopes for a Brexit deal offset concern about pressure on the economy from new coronavirus restrictions. dropped 0.1% to 0.9037, near its weakest levels in two weeks.

“This Thursday’s EU summit is Prime Minister Boris Johnson’s self-imposed deadline for a trade deal, but we expect the deadline to be breached and negotiations to continue in the coming weeks,” said ING.

“GBP net-short positioning does offer some position-squaring upside room, but it’s key to note that the size of GBP shorts is still small compared to other periods where a no-deal outcome appeared as a serious risk.”

Also, was largely flat at 6.7471, with China currency’s recent bout of weakening, on the back of the central bank lowering the reserve requirement ratio for financial institutions when conducting some foreign exchange forwards trading, halted by strong trade data.

 

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Nasdaq 100, DAX 30, Nikkei 225 Forecasts Ahead of Big Tech Earnings

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Nasdaq 100 chart

Chart created with TradingView

Nasdaq 100, DAX 30, Nikkei 225 Forecasts: Neutral

  • The Nasdaq 100 eagerly awaits earnings from Apple, Amazon, Facebook and more
  • German and Euro area GDP data is also due in the week ahead, a key event for the DAX 30
  • The Nikkei 225 will set its sights on the fast-approaching interest rate decision from the Bank of Japan

Nasdaq 100 Forecast

Outlook: Neutral

Earnings season is in full swing and the week ahead will see the release of quarterly reports from some of the world’s largest publicly traded companies. Apple, Amazon and Facebook are scheduled to report after Thursday’s close, a set of stocks that collectively account for more than 27% of the entire Nasdaq 100. Blue chip names like Boeing, General Electric, Pfizer and Ford will also report next week, but the speculative appetite in the big-tech names should afford them the most influence and market-moving potential.

NDX weights

Source: Slickcharts

To that end, market participants have high expectations for the FANGMAN group given their lofty share prices and after their blowout reports last quarter. Therefore, stocks like Apple, Amazon and Facebook will be highly scrutinized and could see a less-than-perfect report result in a seemingly drastic price decline.

Nasdaq Trading Basics: How to Trade Nasdaq 100

Either way, forecasting directional moves following an earnings report is incredibly difficult, so strategies that can benefit from heightened implied volatility may be ideal at this stage.

Nasdaq 100 Price Chart: 4 – Hour Time Frame (September 2020 – October 2020)

NDX price chart

Regardless, the Nasdaq 100, Dow Jones and S&P 500 may wait to stage serious moves until the Presidential election has passed. Given the massive uncertainty surrounding the vote, many traders are likely hesitant to hold significant exposure ahead of such an important event. It could be argued post-earnings price moves might be hampered to some degree, at least until the political landscape has returned to more stable footing.

DAX 30Forecast

Outlook: Bearish

The DAX 30 is set to receive more traditional economic data in the form of Euro area and German GDP readings followed by an ECB rate decision. Struck with another coronavirus wave, Europe may be on pace to disappoint growth forecasts as a slowdown was already hinted at by economic figures toward the end of the prior quarter.

DAX 30 Price Chart: 4 – Hour Time Frame (June 2020 – October 2020)

DAX 30 Chart

The DAX might take notice of a poor result, but I would suspect a GDP-miss might already be priced in to some degree. Nevertheless, the DAX seems tilted to the downside in the week ahead. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

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Nikkei 225 Forecast

Outlook: Neutral

Shifting our focus to the Japanese Nikkei 225, traders will have their hands full with an upcoming interest rate decision from the Bank of Japan. After staging an admirable recovery from the coronavirus, Nikkei 225 gains have slowed to a crawl and the index has made little progress since early September. While the upcoming BOJ meeting will likely see a continuation of the norm for Japan’s monetary policy path, the lack of progress might suggest the Nikkei 225 is awaiting a broader uptick in risk appetite.

Nikkei 225 Price Chart: Daily Time Frame (November 2019 – October 2020)

Nikkei chart

With that said, the Nikkei might track moves in US indices as they await earnings and the looming Presidential election. Since little change is expected domestically in Japan, these outside factors could very well deliver the spark required to push the Nikkei above its recent highs. Still, the outlook remains encouraging. Until these outside issues are resolved, however, the forecast remains neutral or cautiously bullish.

–Written by Peter Hanks, Strategist for DailyFX.com





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ECB Meeting to Determine Next Major Move in EUR/USD

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EURUSD Chart

Chart created with TradingView

Fundamental Euro Forecast: Neutral

  • The European Central Bank’s Governing Council meets this coming week and its statement Thursday, followed by its President’s news conference, will likely be important in determining the Euro’s direction over the next month or so.
  • The ECB will leave all its monetary settings unchanged but President Christine Lagarde could well start preparing the markets for a further easing of monetary policy in December.
  • Meanwhile, there are few signs of a breakout from the broad 1.16 to 1.20 range for EUR/USD that has confined the pair since mid-July.

ECB Meeting Critical for EUR/USD

The statement Thursday at the end of the next meeting of the European Central Bank’s Governing Council, and the subsequent comments by ECB President Christine Lagarde at her news conference, will be critical in determining the future direction of the Euro.

There will be no changes in interest rates or Eurozone monetary policy this coming week but Lagarde could hint at a further policy easing as early as December – a move that could weaken EUR/USD and the Euro crosses. The problem is that the Governing Council seems split on the issue.

Some members seem willing to act, fearing a “double dip” in the Eurozone economy as GDP falls again after a brief respite, hit by a second wave of Covid-19 infections that forces more countries and regions into lockdown. Easier monetary policy might help alleviate the resulting economic impact, help lessen deflationary pressures in the Eurozone and offset any damage to the region’s trade caused by the Euro’s advance since EUR/USD hit a low under 1.07 in March.

Others, though, seem more circumspect, worried that after hitting its highest level for more than a month last week EUR/USD may be vulnerable to a setback. There may also be concern about hinting at easier monetary policy so close to the US Presidential election and that more wary view seems to be that of the markets, where pricing suggests the rate on the ECB’s deposit facility will be minus 0.6% by the end of next year, only marginally below the current minus 0.5%.

You can find an FX traders’ guide to the ECB by clicking here

Putting all these factors together suggests that EUR/USD will continue to trade for a while yet in a broad range between the September 1 high at 1.2011 and the September 25 low at 1.1611.

EUR/USD Price Chart, Daily Timeframe (July 22 – October 22, 2020)

EURUSD Price Chart

Source: Refinitiv (You can click on it for a larger image)

EUR Forecast

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Week Ahead: Data Also Important for EUR/USD

Turning to the economic data on the calendar, the week ahead is a busy one, with German inflation and unemployment figures due Thursday, followed by Eurozone inflation and GDP numbers Friday. Both the German and the Eurozone price data could show steeper falls – emphasizing the ECB’s concerns about deflation – while the GDP data for the third quarter will likely show a strong rebound.

That would do little though to ease double dip concerns so more important might be Monday’s Ifo index of the German business climate in October, the first month of the fourth quarter, and it would be no surprise if that were weaker than in September.

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— Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex





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Crude Oil Prices May Rise on US Stimulus Hopes, PMI Data

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CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices edge up on US fiscal stimulus hopes, upbeat data flow
  • Soundbites from Washington DC, US PMI surveys now in the spotlight
  • Gold prices down as US Dollar gains alongside Treasury bond yields

Crude oil prices managed to retrace some lost ground Thursday after the prior day’s selloff, the largest one-day loss in over a week, as an improvement in market-wide risk appetite helped buoy sentiment-geared assets. Tellingly, the WTI benchmark tracked higher alongside bellwether S&P 500 futures.

Markets seemed to be cheered by the appearance of a positive turn in US fiscal stimulus negotiations after House Speaker Nancy Pelosi said a deal is “just about there”. Data flow was also supportive: existing home sales surged to a 14-year high while jobless claims registered lower than expected.

Gold prices fell as the chipper mood buoyed Treasury bond yields, tarnishing the appeal of non-interest-bearing alternatives. Interestingly, the US Dollar managed to shed the anti-risk trading profile defining recent price action and rose in tandem, hinting the day’s new-flow may have curbed Fed easing bets.

CRUDE OIL, GOLD PRICES EYE US FISCAL STIMULUS AND PMI DATA

Soundbites shaping fiscal stimulus expectations are likely to remain in focus through the end of the trading week. Flash US PMI surveys headline the data docket, with forecasts pointing to a slight pickup in the overall pace of economic activity growth in October compared with the prior month.

A brighter view of the near-term business cycle might keep crude oil prices supported in the near term. A lasting rally seems unlikely however as weak demand continues to weigh. In fact, an EIA implied demand gauge published this week slumped toward Covid outbreak lows registered in April.

Gold may continue to suffer if yesterday’s trade dynamics remain in play, with hopes for a strengthening recovery boosting yields alongside the Greenback. However, disappointing data flow or souring stimulus prospects in the face of opposition in the Republican-controlled Senate might buoy the yellow metal.

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CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are hovering just below range resistance in the 42.40-43.88 area. A downswing from here sees initial support in the 34.64-36.15 zone, with a break below that likely exposing the 27.40-30.73 region next. Alternatively, a daily close above resistance may open the door for a test of the $50/bbl figure.

Crude Oil Prices May Rise on US Stimulus Hopes, PMI Data

Crude oil price chart created using TradingView

GOLD TECHNICAL ANALYSIS

Gold prices recoiled from resistance in the 1911.44-28.82 area, marked by a former range bottom and a falling trend line set from mid-August. Support is eyed in the 1848.66-63.27 zone, with a daily close below that seemingly setting the stage for a move below the $1800/oz figure. Alternatively, claiming a foothold above resistance may be followed by another test above $2000/oz.

Crude Oil Prices May Rise on US Stimulus Hopes, PMI Data

Gold price chart created using TradingView

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COMMODITY TRADING RESOURCES

— Written by Ilya Spivak, Head APAC Strategist for DailyFX

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter





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