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Market caution returns on vaccine doubts

20 May 2020

An air of caution lingered across financial markets on Wednesday morning as optimism over a potential coronavirus vaccine faded into the distance.

Healthcare news website Stat published a report on Moderna Inc, indicating that the American biotech company provided insufficient data. Such a development has raised doubts over the efficiency of a potential vaccine and this negative sentiment continues to be reflected across global stocks.

A darker mood certainly awaits financial markets as concerns revolving around the vaccine compound with global growth fears and renewed US-China trade tensions.

Yen positioned to gain on risk aversion

Expect the Japanese Yen to appreciate against G10 currencies if risk aversion makes a full-blown return.

Looking at the technicals, the USDJPY remains in a wide range on the daily charts with resistance at 108.00 and support at 106.60. An appreciating Yen may encourage a decline back towards 106.60 and 106.00, respectively.

Alternatively, a breakout above 108.00 could swing open the doors towards 109.00.

EURJPY eyes 118.50 resistance level

The EURJPY is in the process of a technical rebound with prices heading towards the 118.50 resistance level.

A solid breakout above this point may trigger a move higher towards 119.00 before sellers re-enter the scene. Given how the fundamentals are in favour of the Japanese Yen, the long-term outlook for the EURJPY points south.

If 118.50 proves to be reliable resistance, prices could sink back towards 117.00.

GBPJPY breakout setup still in play

It has been the same story with the GBPJPY as the currency pair trends within a wide range. All eyes will be on the support at 129.50 and resistance at 135.50.

The fundamentals moving the GBPJPY revolve around Brexit uncertainty, slowing global growth and risk aversion among many other themes.

A decisive breakdown and daily close above 133.00 should pave a path towards 135.50. Alternatively, if 133.00 proves to be reliable resistance, prices may move back towards 129.50.

Commodity spotlight – Gold

Gold is set to glitter this week as investors adopt a more guarded approach towards riskier assets.

The precious metal is finding comfort at levels not seen in more than seven years around $1750 and could push higher should risk-off make a full-blown return.

Focusing on the technicals, a move above $1765 could inspire an incline towards $1770.



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