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Election Polling, Economic Data, Q3 Earnings Season

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US Dollar Fundamental Forecast: Neutral

  • US Dollar was under pressure on revived US stimulus hopes
  • Polling updates may sink USD, economic data risks souring
  • Third-quarter earnings season picks up pace with key banks

The haven-linked US Dollar was under selling pressure heading into the end of last week. This is as the S&P 500 rose as investors once again looked forward to prospects of US fiscal stimulus despite President Donald Trump initially pouring cold water on it. While he entertained the idea of individual components of stimulus, such as further $1200 checks, House Speak Nancy Pelosi advocated for an all-encompassing package.

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What investors may be betting on is rising expectations of a Joe Biden presidency as his lead in the polls has marginally widened as of late. That could open the door to the Democrats’ larger $2.2 trillion package if he wins, depending also on the makeup of Congress. With that in mind, it is understandable to see the Greenback face selling pressure again. However, we are still weeks away from an increasingly tense presidential election.

Focusing on the data docket, key releases to watch include US retail sales and University of Michigan Consumer Confidence. The Citi Economic Surprise Index tracking the United States continues to fall, sitting at its lowest since around the middle of June. While still in positive territory, the trend indicates that rosy data outcomes are becoming increasingly few and far between.

Last week’s initial jobless claims declined from 849k to 840k, missing the more optimistic 820k mark. Meanwhile, Americans are taking out increasingly fewer unemployment benefits given that the main components of the first stimulus package ran out at the end of July – see chart below. Without the expediency of further support, swift economic recovery expectations could dwindle, supporting the USD.

This is as Dallas Federal Reserve President Robert Kaplan poured cold water on the need for further quantitative easing last week. Aside from polling updates and economic data, the third-quarter earnings season picks up pace ahead with major financial institutions like Citigroup and JPMorgan reporting. Their forecasts will be heavily scrutinized given prospects of a swift economic recovery.

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US Jobless Claims Progress Stalling as Unemployment Benefit Withdrawals Fade

US Dollar Outlook: Election Polling, Economic Data, Q3 Earnings Season

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter





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The Nasdaq 100 is Poised for a Volatile Week as Key Earnings Arrive

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Nasdaq 100 Price Outlook:

  • The Nasdaq 100 experienced a volatile start to the week, piercing technical support around 11,600
  • Earnings are expected from more than 35% of the companies listed on the S&P 500
  • Key names include Apple, Amazon, Facebook, Google and Microsoft

The Nasdaq 100 is Poised for a Volatile Week as Key Earnings Arrive

The Nasdaq 100 endured a volatile start to the week as soaring covid cases and vanishing hopes of stimulus in the United States worked to undermine risk appetite. In the world of earnings, an abysmal quarter and outlook for Germany’s largest software company, SAP, delivered a sobering report on the technology sector ahead of what is arguably one of the most important periods this year for the Nasdaq 100. To that end, upcoming earnings from the big-tech giants could create significant volatility in the tech-heavy index right ahead of the US Presidential election.

nasdaq 100 price chart

Source: Bloomberg, Refinitiv, Justin McQueen

With that in mind, all of the newly released information, coupled with high expectations and the immense uncertainty around the election, could create the perfect cocktail for serious volatility at a time when the VIX is already elevated. Thus, the environment for predicting directional moves is far from perfect and strategies that capitalize on volatility may be well suited for the current landscape.

nasdaq 100 price chart

Source: Bloomberg, Refinitiv, Justin McQueen

Either way, the Nasdaq is likely to be in the driver’s seat in the week ahead, making the technical levels at play on the chart all the more important. After breaking beneath support at 11,600 on Monday, the next spot at risk appears to be the Fibonacci level around 11,360 which already rejected one attempt lower. Beyond that, subsequent support might reside around 11,200.

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

nasdaq 100 price chart

On the other hand, 11,600 may now serve as resistance going forward while secondary levels might reside at 11,782 and 12,044 respectively. As these high profile earnings are released to the market, investors will gain a clearer picture of what to expect on the horizon. Until then, it might be difficult for the Nasdaq to establish a clear-cut trend. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

–Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX





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Gold Prices Wilt as Virus Spike Spurs Haven Demand. Biden Leading in Polls

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2020 Election, Gold Prices, Coronavirus Cases, Election Day – Talking Points

  • Gold prices may decline if rising Covid-19 cases stoke demand for haven-linked USD
  • Democratic nominee Joe Biden continues to lead in the polls with his 7-point average
  • XAU/USD price action turning more bearish; is the uptrend in danger of invalidation?

8 DAYS UNTIL THE US PRESIDENTIAL ELECTION

It is almost exactly one week until election day and the polls continue to indicate that Democratic nominee Joe Biden will take the White House. According to RealClearPolitics, the former Vice President is almost 8 points ahead of incumbent President Donald Trump. This figures falls in line with the rough 7-point average Mr. Biden has held for several months apart from a few brief interims of polling convergence.

2020 US Election Polls

Chart showing polling data

Source: RealClearPolitics

Virus Spike Souring Sentiment

Coronavirus cases around the US and world are dramatically spiking and bringing to light the much-dreaded premonition of a second wave hitting the globe in Autumn. With Congress locked in a bipartisan stalemate, lack of progress in fiscal stimulus negotiations has undermined confidence in economic stabilization and soured risk appetite.

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Over the past few days, equity markets have plunged while demand for the haven-linked US Dollar surged. In the process, the allure of anti-fiat hedges like gold fell as future inflation expectations dwindled. Looking ahead, the prospect of reimposed lockdown measures and more severe restrictions could be another election wildcard that investors have to contend with.

Gold Price Outlook

Gold prices may be on the verge of breaking a multi-week uptrend as swelling risk aversion from a spike in Covid-19 cases puts a premium on the US Dollar. This has come at the expense of the comparatively less-liquid precious metal which previously rose amid signs of economic stabilization and optimistic expectations of inflation.

Gold Prices – Daily Chart

Chart showing gold prices

XAU/USD chart created using TradingView

If the slope of appreciation is invalidated, immediate support may be found at 1875.70 where selling pressure may briefly abate. However, if that floor is also broken, the next level to be tested may be the inflection point at 1810.33.

— Written by Dimitri Zabelin, Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or@ZabelinDimitrion Twitter





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US Dollar in the Hot Seat as Election Nears

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USD PRICE OUTLOOK: ELECTION RISK, STIMULUS UNCERTAINTY, EQUITY EARNINGS & COVID-19 GUIDELINES KEY CATALYSTS FOR US DOLLAR VOLATILITY

  • The US Dollar looks primed for elevated volatility this week due to a collision of key risk drivers
  • DXY Index pivots higher as COVID-19 cases mount and market sentiment deteriorates broadly
  • USD price action is strengthening amid intensifying uncertainty around the election, stimulus

The US Dollar advanced broadly on Monday. Souring risk appetite largely explains the bid beneath top safe-haven currencies and latest boost to USD price action. This largely follows a breakdown in major stock indices. It appears that market sentiment is deteriorating primarily on the back of mounting COVID-19 cases globally and fading optimism for a fiscal stimulus deal. Not to mention, with a barrage of equity earnings on tap this week, and the November 2020 election right around the corner, traders could be unwinding risk exposure in light of heightened uncertainty.

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US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (19 JUN TO 26 OCT 2020)

US Dollar Index Price Chart USD Forecast

Chart by @RichDvorakFX created using TradingView

The collision of key macro risk drivers this week might exacerbate US Dollar volatility and contribute to lacking conviction for a directional bias. That said, there could be potential for the DXY Index to continue oscillating around its 50-day simple moving average until clarity emerges after the US election.

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If risk aversion gains traction, however, US Dollar bulls could attempt to eclipse last week’s high and make a push toward September’s top. On the other hand, breaching last week’s low might increase potential for USD price action to extend its bearish slide back toward multi-year lows, but this scenario seems less likely with the broader US Dollar bouncing off its lower Bollinger Band.

USD PRICE OUTLOOK: US DOLLAR IMPLIED VOLATILITY TRADING RANGES (1-WEEK)

USD Price Chart US Dollar Outlook Implied Volatility Trading Ranges

Yet, according to the latest US Dollar implied volatility readings, USD price action is expected to be relatively tame. US Dollar one-week implied volatility readings look relatively in-line with their respective 20-day averages and seem muted when ranked on a 5-year percentile basis as well. This highlights potential for trader complacency and larger-than-expected moves across major currency pairs if volatility accelerates on the back of fundamental catalysts noted above.

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Also worth mentioning, the DailyFX Economic Calendar details several other high-impact data releases and risk events on the docket this week with potential of contributing to US Dollar volatility more broadly. EUR/USD price action might swing violently in response to the scheduled European Central Bank rate decision. GBP/USD could steal the spotlight as the latest Brexit headlines cross market wires. USD/JPY and AUD/USD both look susceptible to sizable reactions this week as well with upcoming inflation reports in focus. Options-implied trading ranges are calculated using 1-standard deviation (i.e. 68% statistical probability price action is contained within the implied trading range over the specified time frame).

Keep ReadingUS Dollar (USD) Presidential Election Performance May Prove Anything but Typical

— Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight





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