The sentiment pendulum swung deeper into risk-on territory on Monday after Moderna revealed its experimental vaccine was 94.5% effective in preventing Covid-19!
This highly encouraging report has injected financial markets with a fresh dosage of optimism, leaving investors increasingly hopeful over a cure bringing back some normality across the globe. As the race for a coronavirus vaccine builds momentum, the mood across financial markets is set to brighten further – ultimately fuelling appetite for riskier assets at the expense of safe-havens.
Speaking of safe-havens, Gold prices have been choppy over the past few hours despite the improving market mood. Price action suggests that the metal is still nursing wounds inflicted from the steep risk-on fuelled selloff last week. Fundamentally, the metal could shine on surging coronavirus cases in Europe and the United States while the US fiscal stalemate may provide a tailwind. However, upsides are seen capped by a stabilizing Dollar and optimism over a coronavirus vaccine.
The technical picture is bearish on the daily charts with weakness below $1890 opening the doors towards $1858.
It has not been the best of trading days for the Yen which has weakened against most G10 currencies.
As the risk-on environment sends investors rushing towards global equities and riskier currencies, the Yen may find itself unloved. Looking at the technicals, the USDJPY is trading marginally below 104.80 as of writing. According to FXTM’s Trader sentiments, traders are 91% short on this currency pair. A weakening Jen may open the doors towards 105.25 in the near term.
There was not much going on with the Dollar Index. Prices are still trading around the sticky 92.70 level. Key levels of interest remain around 92.00, 93.30 and 94.00.
In the United Kingdom, time is running out to reaching a Brexit deal. With 45 days left until the end of the transition period, the risk of a no-deal Brexit is rising by the day. While the issue of state aid and fishing remains the main sticking points in talks, the major issue is what the European Union refers to as the level playing field. The EU basically want the UK to adopt a legal framework in trade agreements that is similar to its own, something that has been repeatedly rejected by Boris Johnson.
Looking at the technicals, the GBPUSD remains a bullish trend on the weekly charts. Prices are trading above the 100 & 200 SMA while the MACD trades to the upside. The currency pair has scope to push higher beyond 1.3000 if 1.3100 proves to be a tough support level.
Alternatively, a breakdown below 1.3100 could trigger a selloff back towards 1.2850.
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