The euro is losing ground to the dollar during early Monday trading. The coronavirus continues to wreak havoc across Europe, with the second wave of the pandemic testing healthcare systems and forcing prolonged new lockdowns that will probably cause a double-dip recession in the eurozone and delay the timing of the expected rebound in economic activity. On the other side of the Atlantic, fears persist of potentially violent protests during Joe Biden’s inauguration, while several Republican lawmakers have voiced their disagreement with the proposed $1.9 trillion fiscal stimulus package. It is therefore not surprising to see investors turning their backs on risk related currencies, such as the euro, and once again seeking the safety of the dollar.
Fears over the new variants of Covid-19 have caused the trading week to get off to a weak start. Indices are showing some moderate declines amid a more risk off stance. This, of course, is not the best scenario for oil, which started the European trading session showing a fractional decline after the fall seen in the final part of last week. Overall, the main scenario remains supportive with buyers popping up each time the price drops. The first support zone for WTI is placed at $51.50, while a recovery to $52.70 would be positive. Only a clear breakout of $53.90-$54 will offer a stronger bullish signal.
European shares traded lower on Monday alongside US futures, on higher market volatility after last Friday’s quadruple witching trading session. Moreover, lingering uncertainties about the speed with which economies will reopen weigh on today’s market sentiment, especially after record infection numbers have been registered in some US states like Florida and Arizona. Utilities, industrial and energy shares are leading declines everywhere this morning. This cautious trading spirit may change through the day as investors were happy to see China’s willingness to comply with the Phase One deal negotiated with the US a year ago. Beijing’s confirmation that it has boosted purchases of US farm goods is likely to ease lingering concerns about the two bloc’s relationship and lift market sentiment on the short to mid-term outlook. Today’s market calendar isn’t particularly busy, but traders are likely to pay attention to speeches from ECB President Christine Lagarde as well as the Governor of Bank of England due in the early afternoon.
The Stoxx-50 Index trades slightly above the lower band of a flag pattern on a very short-term basis. This pattern usually indicates a market break before the trend resurgence but the DMI is showing the selling pressure increasing, which may point to a deeper market correction.
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.