The US dollar is recording modest gains against the other major currencies during early Tuesday trading. The greenback has been on a losing streak due to fears over the country’s ability to quickly bounce back from the economic shock of the lockdown, as the number of cases continues to escalate.
Today investors have started to consolidate their positions ahead of two risk events: The Fed will hold its July meeting later today while the deadline for Congress to approve a new fiscal support package is coming up this Friday.
Ricardo Evangelista – Senior Analyst, ActivTrades
The day started once again with a new record for gold, as the Comex futures price had a brief flirtation with $2,000. But the rally has run out of steam and the price quickly collapsed after touching this historic landmark. The sharp correction seen in the last few hours, with high volumes, is showing that the rally of the last 10 days was a bit too fast and some investors are now taking profit.
Volatility remains high and we’ve now entered an interesting phase where buyers and sellers are more evenly matched and this could lead to a consolidation phase in the range between $1,860 and $1,980.
Carlo Alberto De Casa – Chief analyst, ActivTrades
European markets are mostly trading higher but without a clear direction nor significant volatility on Tuesday as the “wait and see” mood continues on riskier assets. The current short-term lack of directionality is partly explained by expectations investors have towards the ongoing negotiations between Republicans and Democrats in the Senate about a multi-trillion-dollar recovery plan aiming to provide more support to the US economy. On the other hand, market optimism remains strong and alive with investors seeming to view all news as good news.
Indeed, most market operators aren’t scared by the recent surge in coronavirus cases as it is likely to lead to a more dovish approach from the FOMC tomorrow, bringing even more support to markets.
Having said that, the surge in alternative assets and safe havens (precious metals and crypto markets) is also a sign money managers have started to diversify their exposure in order to hedge their portfolios against any potential downside risk on stocks, as the US election looms and tensions with China continue to simmer.