Market Analysis

The dollar is losing ground to other currencies

FOREX

The dollar is losing ground to other currencies, as risk appetite continues to strengthen in financial markets during early Tuesday trading. A cocktail of positive news has lifted the spirits of investors. Encouraging vaccine-related reports show an increasingly clear path back to normality, while political uncertainty in Washington is unwinding as a growing number of key figures now accept that Joe Biden will indeed be the next US president. Topping up the current optimism, the President-elect lined up Janet Yellen, the former Chair of the Federal Reserve, to be the next Treasury Secretary. This move creates the prospect of greater harmony between the two institutions and is conducive to guaranteeing the coordination of fiscal and monetary stimulus, conditions which are likely to lead to further dollar weakness.

Ricardo Evangelista – Senior Analyst, ActivTrades


GOLD

The extended period of risk on finally hit gold with the price breaking the support level of $1,850 to plunge to the lowest level since July. This negative correlation with risk is nothing new for gold as investors are continuing to invest on riskier assets instead, betting on a quick solution to Covid-19. The acknowledgement of Biden’s victory from the Republicans is likely to reduce the risk of further tensions and represents a supportive element for stocks, while haven assets such as gold are suffering. Therefore, we have seen a new decline of bullion, which is now in a danger zone as many stop losses and profit-taking measures were set to be triggered below $1,850. As mentioned, despite the dominant risk on scenario, central banks will still be forced to print a huge amount of money and this could revamp investors’ interest for gold in the near future.

Carlo Alberto De Casa – Chief analyst, ActivTrades

 

EUROPEAN SHARES 
Asian stocks, EU equities and US Futures all traded higher on Tuesday, extending yesterday’s gains as “risk-on” sentiment prevails across the world. Market sentiment has been given a fresh boost after the US General Service Administration removed some uncertainty by acknowledging Joe Biden’s win in the Presidential election. While traders around the world were already buying on the back of progress on vaccine developments and positive macro data, the announcement by the GSA allows them to look further into the future, opening up bets on the Biden administration improving relationships with significant trade partners like China. So far this market rally resurgence has had a really positive impact on oil markets and companies linked to them such as cruisers and airlines while techs shares have fluctuated.

Pierre Veyret– Technical analyst, ActivTrades

 

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