Bulls buy back the drawdown, FX dynamic supports optimism

14 September, 2020

Global markets are experiencing some relief at the beginning of a new week. Pressure on the US indices has stopped approaching the 50-day average, which signifies this dip as technical and short term. The S&P 500 went below this line several times in one day last week, but each time it was eventually bought back. The Dow Jones also touched this mark, while Nasdaq has been hovering around its own since the beginning of last week.

The 50-day average failure in February was a preface to a sharp increase in pressure in the stock markets, and a stronger buying wave followed the return above this line. So this indicator has been doing a great job in recent months.

This time the dynamics around the 50-day average can be interpreted as moderately positive. Shares received support in the downturns, reflecting fundamentally high demand despite profit-taking.

Only if the Nasdaq100 falls below the 50-day average and the closes the day below 11,000, we can talk about stronger pressure. For S&P500, we will see a similar signal if the index slips below 3300.

At times like this, when the bull and bear scales look balanced, we often turn our attention to the dynamics of the foreign exchange market, and there are still some positive signals.

The USDCNH pair is trading around 6.83, halting its decline in September, but avoiding a correction rollback. This is an important sign of continued demand for risk assets from Asian investors. The dynamics of AUDUSD, which consolidates around 0.73, avoiding a corrective rollback after a month-long rally, tell us the same thing.

The Japanese yen and Swiss franc have been moving in a range since early August, with no signals that risk aversion is prevalent in the markets. EURUSD for the fourth consecutive trading session shows positive dynamics on the daily charts.

However, attempts by bulls to develop an offensive and return to the high area at 1.2000 are under pressure. The ability of EURUSD to catch up to 1.19000, combined with positive index movements, could serve as a strong bullish signal to markets and launch a new wave of buying.

Otherwise, the bulls could capitulate fairly quickly, rushing to be the first sellers in overheated markets before the decline becomes threatening.


Source  
Euro struggles as U.S. deal hopes fade, COVID spreads20 Oct, 2020  

The euro struggled to rise above the $1.18 level on Tuesday as fading hopes for a U.S. coronavirus aid package dealt a blow to risky assets worldwide, with rising...

Pandemic surge increasing market cautions15 Oct, 2020  

The US indexes stay under moderate pressure on the third day. The S&P500 lost 0.7% on Wednesday and futures on the index are down another...

Dollar extends gains, hitting six-day high14 Oct, 2020  

The dollar index extended its gains on Wednesday and demand for riskier currencies was subdued, as investors became more cautious over rising COVID-19 cases...


Oil lost its momentum but retained its growth potential13 Oct, 2020  

The technology giants are pulling the markets up again. However, this time their positive impact has not yet been able to create a broader growth impulse...

Bank of England asks banks how ready they are for sub-zero rates12 Oct, 2020  

The Bank of England asked banks on Monday how ready they are for zero or negative interest rates, following up its announcement last month that it was considering...

Here's How Much the S&P 500 Can Fall9 Oct, 2020  

President Donald Trump announced Tuesday that he was halting stimulus talks until after the election, causing stocks to drop suddenly before markets close...


Over 80% of people with coronavirus didn't have key symptoms8 Oct, 2020  

So-called "silent spreaders" of the coronavirus could be more common than previously thought, with a U.K. study finding that more than two thirds of people...

Trump may face a "backlash" by returning to work while still infected6 Oct, 2020  

U.S. President Donald Trump returned to the White House on Monday despite still being infected - a move analysts say could draw "backlash" and shows he doesn't take...

Dow futures fall more than 200 points after U.S. presidential debate30 Sep, 2020  

U.S. stock futures declined early Wednesday as traders digested the first U.S. presidential debate. Dow Jones Industrial Average futures pointed to an opening loss...