Date: 27 May 2020
The dollar is gaining ground to other major currencies in early trading on Wednesday, as the mood on markets shows signs of leaning more towards risk aversion. Investors are looking for the safety of the dollar as Sino-American tensions once again threaten to escalate and derail the positive sentiment that has prevailed over the last few days. The latest focus of tension between the world’s two largest economies is arising as China prepares to implement a new security law in Hong Kong and the US hints at retaliating with sanctions. Such an escalation is likely to hinder risk appetite, increasing the appeal of refuge assets.
Ricardo Evangelista – Senior Analyst, ActivTrades
A risk on approach continues to prevail on stock markets with investors switching a percentage of their portfolio back to shares in the last few weeks with this trend persisting in the last two days. Despite the temporary weakening of the greenback, bullion is suffering in the current climate. The spot price declined again to trade near $1,700 as investors are seeing less urgency of having a significant percentage of gold in their portfolio for the time being. Technically we have seen the breakdown of the support level placed at $1,725, with $1,700 the next target while there is space for a further correction down to $1,675 if the risk on scenario persists.
Carlo Alberto De Casa – Chief analyst, ActivTrades
Shares edged slightly higher in Europe on Wednesday despite a mixed session in Asia overnight fuelled by simmering Sino-American tensions. While investors now expect fresh US sanctions as a reply from the Trump administration to China’s behaviour towards Hong Kong, it certainly hasn’t killed the optimistic mood reigning on markets right now. Developments on a drug treatment as well as no signs of the virus yet returning in some of the worst affected EU countries are boosting investor appetite for riskier assets and driving the current rally. Traders are keeping their focus on data having welcomed the US New Home Sales report yesterday after it surprisingly topped estimates and opened the door to a possible recovery. As previously said, data are likely to continue playing an important part in investors’ trading stance in the coming weeks. If numbers continue to prove reassuring, there will be a high probability market sentiment will send prices much higher than now, as there is still room to do so, even after the 30% rally we have already seen on stocks since the end of March.
The German DAX-30 Index is the eurozone’s best performer today with the price now flirting with the significant technical level at 11,600pts (Bearish gap closing). A clearing of this zone would open the way to fresh highs with the next resistance level located 850 points higher at 12,445pts on a short to mid-term perspective.
Pierre Veyret– Technical analyst, ActivTrades
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication. All information has been prepared by ActivTrades PLC (“AT”). The information does not contain a record of AT’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of futures performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk.