GLOBAL STOCKS REBOUND AS EVERGRANDE RISKS EASE

Global stocks jumped sharply as investors assessed the ongoing contagion risks brought about by Evergrande, the second-biggest real estate developer in China. In the United States, futures linked to the Dow Jones rose by more than 350 points while the S&P 500 and Nasdaq 100 futures rose by more than 0.50%. Similarly, in Europe, the DAX, CAC 40, and FTSE 100 rose by more than 1%. Investors likely believe that the risks posed by Evergrande have already been priced into the market. Also, companies that will be affected are mostly in China, where authorities have put strict regulations limiting foreigners’ participation in the debt market.

The Canadian dollar rose against the US dollar after the latest election. Justin Trudeau’s Liberal Party won 157 seats while conservatives won 122 seats. The rest of the seats will be held by the New Democratic Party. This means that Trudeau will have to form a coalition with a minority party. Analysts believe that there will be no major changes in Canada’s policies in the near term. The loonie also rose because of higher oil prices. Brent, the global benchmark, rose to $74.90 while the West Texas Intermediate (WTI) rose by more than 1.38%.

The US dollar retreated as sentiment in the market improved ahead of the Federal Reserve meeting. The dollar index declined by 0.10% while the CBOE Volatility Index (VIX) declined by more than 10%. Economists expect the Federal Reserve will sound a bit optimistic about the American economy. Besides, inflation is still above the bank’s target of 2.0% while the unemployment rate has been declined. Elsewhere, the Riksbank left interest rates unchanged while RBA published its minutes earlier today.

USDCAD

The USDCAD pair declined to a low of 1.2755, which was substantially lower than Monday’s high of 1.2898. On the four-hour chart, the pair moved below the important support level at 1.2762, which was the highest level on September 8. On the hourly chart, the pair has formed a head and shoulders pattern and moved below the 25-day moving average. The Relative Strength Index (RSI) has moved to the oversold level. Therefore, the pair will likely keep falling as traders wait for the Fed decision.

EURCHF

The EURCHF pair declined to a low of 1.0850 as the market reflected on Europe’s energy crisis and the upcoming SNB decision. On the four-hour chart, the pair moved below the 25-day and 15-day moving averages. The Relative Strength Index (RSI) has also been in a bearish trend. At the same time, the pair moved slightly below the lower line of the ascending channel. It is also slightly above the 38.2% Fibonacci retracement level. Therefore, more weakness will be confirmed if the price moves below the lower line of the channel.

EURUSD

The EURUSD pair rose to an intraday high of 1.1737, which was higher than this week’s low of 1.1700. On the four-hour chart, the pair is slightly above the parabolic SAR dots. It is still below the 25-day moving average while the Relative Strength Index (RSI) has risen. Therefore, this rally is likely a dead cat bounce, meaning that the pair will resume the downward trend.