After several days dominated by a vaccine-related optimism, which offered support to the euro, headwinds are now challenging the buoyancy of the single currency, causing losses versus other major currencies. The immediate reality presents record numbers of new infections and fatalities in several European countries, reminding investors that the return to normality still remains on the distant horizon. The second wave of the pandemic will surely add to the economic woes of the continent, particularly as any stimulus package continues to be blocked by a political tug-of-war between Brussels and a Polish-Hungarian coalition.
In the last few days a stream of positive updates about vaccines have pulled up stocks. The general risk on scenario hit the gold price, triggering a notable decline last week. Yesterday, bullion dropped a further 1% on the news of the increased percentage success of Pfizer’s vaccine. So far the price has managed to remain in the lateral trading range of the last few months between $1,850 and $2,070. We are just a few dollars above the lower edge of this channel and a fall below this mark would be seen as a negative signal. Investors, anyway, should not forget the strong dovish activity of central banks, which will last for a long time and are likely to be supportive for the yellow metal.
European shares drifted significantly lower on Thursday, following the trend started at the end of the US trading session yesterday as investors switched to risk-off. The market euphoria of the past week is fading away as investor sentiment is now being weighed down by tougher restrictions, offsetting vaccine progress in many areas. Even if the long-term recovery isn’t really threatened yet, most investors expect a market correction due to mounting risk to economies from a very short-term perspective. Having said that, a bearish short-term correction would still be technically “healthy” for stocks as it would temper the powerful rally registered in November. Today’s session is likely to remain volatile as investors will keep their focus on major macro data (initial Jobless claims and existing home sales) as well as the EU summit. The Stoxx-50 Index has recently broken-out of a bearish rising wedge and can now find significant support at first 3,440pts, then 3,400pts and ultimately at 3,355pts.
Pierre Veyret– Technical analyst, ActivTrades
Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.
Independent 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.