The US dollar is taking a break after several days of gains, with the index that measures the performance of the greenback versus a basket of other currencies almost flat during early Tuesday trading. The turbulence registered in Washington last week ended up creating a political atmosphere that is likely to allow the Biden administration to deploy more substantial stimulus packages than many thought were possible. As the expected size of the fiscal intervention grows, the likelihood that the Fed will at some point towards the end of the year start tapering its purchasing program has also increased, driving Treasury yields higher and supporting the dollar.
Oil is continuing its recovery, with WTI getting closer to $53. The modest decline seen in early trading yesterday was just a temporary break and the barrel remains in a supportive scenario. Investors are betting on the continued recovery of global demand over the next few months after a difficult 2020. The cuts announced last week by Saudi Arabia are basically a victory of Russia but in some way are also showing that OPEC+ can still play its role in the current markets. The price is therefore consolidating and remains in a positive environment.
European equities traded sideways on Tuesday, following Monday’s global sell-off. It seems the December trading enthusiasm, driven by the prospect of a global economic recovery, is now being offset by alarming Covid-19 numbers as well as valuation concerns over stocks that went far away from their equilibrium price. Those two bearish drivers are pointing towards a sharp short-term technical correction on certain sectors, like tech shares, while investors may want to increase their exposure to more attractive assets such as energy shares and cyclical values. The economic calendar isn’t very busy today with the focus instead on earnings season with Citigroup, Wells Fargo and JPMorgan & Chase reporting their Q3 results today.
The DAX-30 Index keeps on consolidating and is still trading inside its main resistance zone between 13,800pts and 14,000pts.
Pierre Veyret– Technical analyst, ActivTrades
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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.