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Daily market commentary: The Dollar Index continues to decline



FOREX

The Dollar Index continues to decline with the accumulated losses for the week now exceeding 1.1%, while the euro climbed to $1.16 for the first time since October 2018. Risk-on endures, despite the apprehension generated by the escalation in tensions between China and the USA. The closure by the American authorities of the Chinese consulate in Houston is seen as an escalation in the latent conflict between the world’s two largest economies, which many analysts believe will invite retaliation from Beijing.

However, for the time being, investors appear to be focused on the positivity of the last few days, following the approval of the EU recovery fund, good progress being made in the quest for a COVID vaccine and the latest survey of German consumer confidence that surprised to the upside.

EURUSD chart

Ricardo Evangelista – Senior Analyst, ActivTrades

GOLD

If there is a new correction on stock markets, gold is expected to be a perfect store of value. Investors are betting against central banks as they think that currencies are now hyper-diluted compared with bullion. Gold, different from the greenback and other currencies, cannot be printed and investors are buying it in vast quantities, driving both the spot price and futures to less than $50 away from their highest ever levels.

The trend remains strongly bullish, even if some technical indicators are now showing gold as hyper bought, reflecting how quick the recent rally was. At this stage, there is no correction signal, while the weakening of the greenback is further boosting gold’s rally.

Carlo Alberto De Casa – Chief analyst, ActivTrades

daily market analysis

EUROPEAN SHARES 

Stocks opened slightly higher in most European markets on Thursday, retracing some of yesterday’s losses while market sentiment remains mixed and directionless on a very short-term basis. Even if most bullish trends remain valid on European benchmarks so far, especially on the DAX-30 Index, lingering concerns over the uncertainty on the timing of the next US stimulus package combined with simmering US-Sino tensions is making stocks a less attractive asset class.

While investors welcomed recent progress made by healthcare companies in the struggle against the pandemic (Pfizer Inc. +8%), most of them are becoming increasingly worried that the relationship between Washington and Beijing will worsen prior to the US election in November and put further pressure on riskier assets. Having said that, it is no surprise to see safe havens, like precious metals, surging as investors may want to hedge themselves against potential downside risks by diversifying their exposure after a long rally.

DAX 30 chart

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.

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Daily market commentary: The Dollar Index continues to decline

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