The dollar index, which measures the performance of the greenback versus a basket of other major currencies, has lost more than 1% since the beginning of the week as risk appetite rose and the appeal of the safe havens diminished. Hopes that Republican and Democrat law makers in Washington would reach an agreement for the release of an economic stimulus package led to an increase in optimism. However, a deal between the two parties, allowing the release of economic aid before the November 3 elections, is starting to look unlikely and as a result the greenback’s losing streak appears to have come to an end as the dollar index remains flat during early Thursday trading.
Gold spot price rallied to $1,932 as expectations of further monetary stimulus initially grew in the US, before easing down back to $1,915 after doubts over an imminent deal emerged.
From a technical point of view, there has been an interesting assault to the resistance level at $1,930/1,932, but that level remains firm so far. Investor interest remains huge and every time politicians speak of the possibility of new economic stimulus (maybe even before the US election, so potentially in just a few days) bullion rallies. It is clear the yellow metal is seen in this phase as a rescue anchor in a different scenario. Gold could mitigate portfolio impact in case of a new stock collapse – and this is not a big news – but investors are also seeing bullion as an inflation hedge, in a scenario where central banks are pumping huge amounts of liquidity as they attempt to recover economies.
European shares drifted lower on Thursday, following Asian markets and US futures amid global risk aversion sentiment boosted by mounting virus concerns. Stock investors remain stuck in uncertain times, with various market drivers to be considered before making their investment decisions, leading to the current lack of directionality. Whilst the next US stimulus move is already highly anticipated by most traders, most are keeping a cautious eye towards macro data as well as corporate news in order to get more clues on the impact of the pandemic. Today’s trading sessions will be marked by major US data, with initial jobless claims and existing home sales data for September due later today, as well as earning reports from large US groups like Coca Cola, AT&T and Intel. In Europe, stock investors expect more volatility on the CAC-40 index as a batch of results from French-listed companies like Dassault Systemes, Hermes, L’Oreal, Kering, Thales and Michelin are awaited during and after the trading session.
The market went to test its major support zone around 4793 pts shortly after the opening bell, and has successfully rebounded since then. Prices will have to clear the 4,800 pts level in order to unlock the bullish potential towards 4,830 pts on the very short-term. A break out of the 4,772 pts/4,804 pts zone could quickly drive prices deeper towards 4,745 pts and 4,665 pts by extension.
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.