Date: 11 Jun 2020
After several consecutive sessions of losses, the Dollar Index is just about in the green in early Thursday trading. As many had predicted the Fed kept the dovish tone that has marked its stance since the beginning of the coronavirus crisis; however, Jerome Powell’s gloominess was one or two notches more sombre than expected. The Chair of the American central bank painted a grim picture of the economy and warned of more hard times ahead, throwing a bucket of cold water over what was perhaps excessive optimism on the part of some investors. In the aftermath market sentiment appears to have turned and risk appetite diminished, with investors once again seeking safe havens, which of course benefits the dollar.
Ricardo Evangelista – Senior Analyst, ActivTrades
The quick turnaround of share indices has renewed interest in gold with the spot price jumping up to $1,740 as investors move liquidity away from stocks. In a scenario where the greenback is losing strength, we are again seeing a favourable environment for bullion, which is returning to its role as a safe haven, while the inverse correlation between gold and stocks recovers strength.
Technically, a clear climb above the resistance placed at $1,745 could open space for further rallies, with the 7½-year-top placed at $1,765 a potential target.
Carlo Alberto De Casa – Chief analyst, ActivTrades
European stocks drifted lower on Thursday, alongside US Futures, as market sentiment gets hustled. Yesterday’s Fed announcement on a no interest rate hike environment for the rest of the year combined with its current bond buying program had little impact on the market. Indeed, most of these measures were already priced in by bull traders, who used this leverage to drive stock prices higher in the recent days, making this week likely to be a consolidation phase. However, if some investors were expecting a less directional market this week, with most of them betting on a global recovery, they didn’t really see a new virus wave coming. Jumps in new daily cases were spotted in some of the US states like Texas and immediately sparked concerns of a potential second round of infection in the country, inevitably impacting market sentiment towards riskier assets. Of course, there must be many more signs of a potential second wave before this scenario becomes a real possibility by traders.
The technical situation on EU stocks no longer looks positive. The DAX-30 Index is one of the worst performers, trading below 12,200pts this morning. The bullish channel has now been invalidated with both the moving average registering a bearish reversal as well as the RSI indicator falling back below its 50% line into the selling zone. The next major support for the market is in the range between 11,880-12,000pts while an intermediary one can still be found above 12,115pts on a very short-term basis.
Pierre Veyret– Technical analyst, ActivTrades
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