It was a positive start to the week with global equities marching higher as investor welcomed the weekend’s declaration that Joe Biden won the 2020 US election.
Although this was not the ‘blue wave’ outcome initially projected, his presidency may represent a return to political normality while putting an end to four years of constant unpredictability. However, Donald Trump has yet to concede or show any signs of acknowledging his defeat. This development is likely to create a sense of uncertainty and raise questions over what the future holds. US Political drama may remain an ongoing theme even after Joe Biden is officially sworn in at noon on 20 January.
Things just got better for global markets on Monday afternoon after the drug companies Pfizer and BioNTech announced that their coronavirus vaccine was 90% effective in tests! The S&P 500 sprinted to fresh record highs on this news while Gold tumbled over 4.5% - smashing into the $1850 support level.
On Tuesday, equity bulls took a breather as questions were later raised over how the coronavirus vaccine would be produced and delivered across the globe. This dose of reality, offered an opportunity for Gold to consolidate around key support levels.
In our mid-week technical outlook, we discussed the possibility of King Dollar returning back to the throne. Persistent concerns around the U.S fiscal stimulus and possible delay in the transition of power to President-elect Joe Biden dampened the market mood while surging coronavirus cases in Europe and the United States fuelled risk aversion. Given how the Dollar is still considered as a prime destination of safety, such market conditions could elevate the currency. Although the DXY rebounded mix-week, prices later consolidated around 92.70 level.
Tech stocks looked to be making a comeback mid-week with the all-important FAANGs finding a bid. At the time of writing, the Nasdaq 100 is trading marginally lower with trader’s net long, according to FXTM Trader’s Sentiments.
Global equities took another breather near the end of the week as investors realised that the pandemic won’t disappear as fast as it arrived. While the vaccine has been the best news received since the virus spread, life won’t return to normal in a matter of days or weeks.
With so much going on across the globe, investors had to catch their breath! As the vaccine euphoria faded, attention was redirected towards the surging coronavirus cases in the United States which topped 160,000 per day. Given how the potential for more lockdowns across the pond is clear, concerns are likely mount over the impacts it could have on the economy.
As the trading week slowly comes to an end, the eery calm on Friday 13th may signal a storm ahead. Markets seem to be waiting for a fresh directional catalyst to make the next big move either up or down.
Looking at commodities, after experiencing a sharp selloff fuelled by vaccine euphoria at the start of the week, Gold continues to nurse its wounds above the significant $1850 support level.
However, with the metal in the process of forming a death cross technical formation where the 50-day simple moving average crosses below the 100-day simple moving average, bears could be around the corner.
Fundamentally, the risk-off mood triggered by rising coronavirus cases and the ongoing stalemate over a fresh round of US stimulus may stimulate appetite for Gold. But gains may be limited if the Dollar rebounds. Talking technicals, a daily close above $1890 may open a path towards $1900 and higher.
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