By Deepta Bolaky
Global equities struggled to advance higher as investors mulled US stimulus negotiations. European stocks initially brushed aside coronavirus lockdown restrictions in certain parts of Europe and pared gains as the reality of the state of coronavirus relief negotiations in the US showed no progress ahead of the self-imposed deadline by the Democrats.
Major equity indices in the European and US session ended in negative territory on Monday.
The US election and stimulus package remain the key themes for the US markets. Given that negotiations around the stimulus package are still murky, investors will look for the outcome of the election which is heavily tied with the expectations of the size of the stimulus package:
On the earnings front, International Business Machines (IBM) reported strong cloud revenue growth, gross margin expansion, solid balance sheet and liquidity position which was in-line with expectations. However, the company’s share price fell in extended trading hours as revenue was down by 2.6% which marks a fall for the third consecutive quarter on an annualised basis:
On Tuesday, among a series of large-cap companies reporting their quarterly updates, investors will eye Netflix Inc third-quarter 2020 financial results.
In the FX space, the US dollar has a difficult start to the week as traders were set on the stimulus negotiations. However, as the day comes to an end, traders noted continued narrow differences ahead of the deadline set by Democrats. The greenback pared losses and major currencies ended weaker than the safe-haven currency.
Commodities- related currencies were among the worst performing currencies against the US dollar.
On the economic front, attention was on China’s economic data and GDP figures. China’s GDP grew 4.9% in this third quarter, missing the estimates of 5.2%. However, it was another quarter of expansion even though it was at a slower pace than expected.
Industrial Production and Retail Sales came above expectations:
The EURAUD pair has bubbled along since June without providing a clear directional bias. The price, caught within a range, has looked static and uninteresting, but that could all be about to change as we study the point and figure levels above.
Firstly, the price action itself may be suggesting a switch to an overriding bullish move to cap off this long period of consolidation. Note how we’ve seen several tests of linear support and resistance throughout this range until now. It would seem EURAUD may have just printed a higher low to push the price in an upward trajectory.
Just this afternoon, we see demand generating a buy signal as demand surged past the double-top at 1.6563. Of course, this could well be a false breakout, and the price may once again dip towards the 1.61 regions. However, combine this signal with the possibility of a new higher low, and it starts to paint a more bullish outlook.
If we also take a look at the daily Ichimoku chart for EURAUD below, the price is now above the cloud, along with the longer-term lagging span line in purple. Both of these elements indicate a strong bullish sentiment. This chart may also help explain why the pair has struggled these past few months with directional bias, as price action fought its way through choppy cloud support and resistance.
Back to the point and figure chart and should EURAUD continue to rise, nestled upside targets are within the 1.70-1.72 area. Alternatively, the whole continuation move might still have some juice to squeeze, and in this scenario a re-test of the 1.61 level to complete the next price swing down is probable.
Crude oil prices remained within familiar levels on Monday. Given the forecasts on the demand side, there is also increasing pressure from OPEC members and its allies to balance the supply side and avoid flooding the oil market with extra supply.
The demand side narrative continues to remain the major concern following the renewed lockdown restrictions and social distancing measures in certain parts of the world. On the supply side, traders will likely continue to monitor the weekly oil reports for fresh trading impetus.
As of writing, WTI Crude oil (Nymex) and Brent Crude (ICE) were trading firmer at around $40.64 and $42.62 respectively.
The precious metal remains stuck around the $1,900 in anticipation of more updates on the stimulus front. As of writing, the XAUUSD pair is trading around $1,902.
Source: GO MT4
By Deepta Bolaky
Key upcoming events
|Wednesday, 16 October 2020
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