Foreign exchange markets are calm this Tuesday morning, with investors looking towards the United States as the deadline for an agreement to be reached on an economic stimulus package between Democrats and Republicans approaches. The maths is simple: failure to agree today will probably mean delaying the deployment of the much-needed aid package until after the November 3 election. With a second wave of the coronavirus advancing in Europe, such a scenario would be likely to penalise risk-related assets like the euro while increasing the safe haven appeal of the dollar. The current lack of movement in FX trading may be the calm before the storm, with investors keeping a keen eye on the discussions scheduled for later between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin. More volatility should be expected towards the end of the day.
In the last few days there hasn’t been much volatility on bullion as investors awaiting new market drivers. Only a clear climb above $1,930 would give new strength to the price, while although the bull trend seems to be in pause it is definitely not yet dead. We will have a weakness signal below $1,880, while the support level – and the first danger zone – for gold is at $1,850-$1,860, which is the low reached in late September. Equally, with no new stimulus the price could remain in this major lateral phase for a while longer yet.
It could seem strange talking about a lateral phase with the borders so far apart (there are more than $200 between the September low at $1,860 and the August peak at $2,070), but this is just the consequence of the increased volatility that we have seen on all assets in 2020. Moreover, as previously mentioned, there significant intermediate resistance levels at $1,930 and $1,970, while $1,885 and $1,872 are the first support zones.
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.