Progress on Covid Stimulus Package Lifts Equities | FXTRADING.com - International

  • Donald Trump and Joe Biden locked horns in yesterday’s hostile debate. Whilst volatility was lower than initially expected, Trump sent futures markets tumbling during his closing remarks by all but promising to contest the election results, drag them to the Supreme Court and coldly stating “this will end badly”.
  • “Progress” on talks between US Republicans and Democrats for a $2.2 trillion Covi-19 stimulus package helped lift equities, but not enough has been made for the Democratic majority House to vote.
  • European cash indices closed lower whilst US indices finished slightly higher, but it was a volatile session where little ground was truly made.
  • Despite the turbulence, gold and silver finished lower and the USD index produced doji (indecision day) at key support, so FX market find themselves at a technical juncture as we head towards the weekend.

 

  • Japan’s Tankan report is the main calendar event in the Asian session, as it provides a broad read of the current and future expectations of their service and manufacturing sectors. Nikkei and JPY are in focus for news traders (in particular AUD/JPY and USD/JPY).
  • Markit’s final PMI reports for Europe, UK, US and Canada are released. Whilst they warrant a look, it is usually the ‘flash’ (initial) PMI reports that move the markets more, unless we see a major revision in the final report.

 

USD/CAD: Bearish Outside Day

  • After several failed attempts to break above 1.3400, USD/CAD rolled over and printed a bearish outside day, paving the way for a deeper correction.
  • The bias remains bearish below 1.3400, although we’d prefer prices to remain below 1.3350.
  • Bears can consider shorts below 1.3350 to target support around 1.3250.
  • Keep an eye on US and CA PMI reports tonight.

 

Silver (XAG/USD): Bearish Engulfing Day

  • A bearish engulfing candle beneath 24.40 resistance suggests the swing high is in place.
  • Prices are also trading within a small corrective channel.
  • A break beneath yesterday’s low (which would also break the corrective channel) assumes bearish continuation.
  • The bias remains bearish below 24.40. Bears can initially target the 21.70 low.
  • Gold (XAU/USD) also provides a similar setup below 1900 resistance, although price action on silver appeared the more bearish.

 

USD/CNH: Bears Relinquish Control

  • Finally, USD/CHH broke beneath the 6.800/70 support zone although if you’d have blinked you may have missed it.
  • Given its established bearish trend and break of correction line, the bias remains bearish and for a retest of the 6.7417 low.
  • We would prefer to seek bearish setups on lower timeframes after a period of consolidation (or a retracement).
  • A break above 6.800/70 invalidates the near-term bearish bias.

 

Watchlist Update:

Hang Seng (HK50): Bias remains bearish below 24,132. Bullish momentum resides in the resistance zone although momentum needs to subside before reconsidering shorts.

WTI: Bias remains bearish below 40.88 / bearish trendline. A bullish inside candle has formed, so bears could either wait for consolidation or break to new lows before reconsidering shorts.

S&P/ASX 200 (AUS200): Range trading strategies preferred whilst trading within the 5800 – 6200 area. Bearish momentum needs to subside on the lower timeframes before considering longs at the lower end of the range.

USD/CHF: It’s correction lower may have found support at the monthly pivot. But we’d prefer to see volatility subside after yesterday’s volatile range.

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