The dollar is strengthening during early Wednesday trading, in what can be seen as a safe-haven trade resulting from growing concerns about a potential new wave of the ongoing health crisis, following the emergence of new strains of the virus that threaten to derail the global economic recovery prospects. As a result, investors are displaying less risk appetite than they have recently, with the major stock indices all falling from last week’s highs and safe-haven currencies, such as the dollar and the yen, rising on the back of greater demand.
Despite a modest rebound by the greenback, gold continues to recover momentum. This seems to be mostly related to the relative calm that we are seeing on US yields, as the 10 years bonds remain below 1.6%. Moreover, in the last few weeks the technical scenario has clearly improved with the price breaking through the key resistance area of $1,750.
The risk on scenario was sharply interrupted yesterday, as growing fears about a slowdown in the vaccine rollout and the surging number of cases in India pulled down stocks and helped drive gold up, confirming its strength at times of market turbulence. Any news regarding further monetary stimulus could be seen as a further positive market driver for bullion against an already supportive backdrop.
Shares continued to slide lower at the European open on Wednesday, following the global trend as the risk-off mood dominates. Even if some investors managed to stop the sell-off, at least temporarily, shortly after the opening bell this morning, the situation remains uncertain for most markets. Rising virus cases around the globe and growing vaccine hesitancy are seriously denting this week’s market sentiment, especially after investors were already seeking reasons to reduce their exposure following the record levels reached by stock markets very recently. One of the best performances comes from Madrid today with the IBEX-35 Index still trading above 8,500pts. However, this may be a corrective move that will be halted at 8,560-8,595pts after the mid-term bullish trendline was broken yesterday, invalidating the bullish trend.
Pierre Veyret– Technical analyst, ActivTrades
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Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.