- October 7, 2020
- Posted by: Analysis Team
- Category: FOREX, Technical Analysis
US and Asian stocks turned lower while the dollar rose after Donald Trump called-off stimulus talks with the Democrats until after the election. The Dow Jones, S&P 500, and Nasdaq 100 declined by more than 1.30% each. The decision means that millions of Americans will go through hardship in the next few months. Also, it means that the US economy recovery is at risk.
In a statement yesterday, Jerome Powell said that the US economy needed another phase of fiscal stimulus. Also, some companies like the major airlines have said that they will lay-off thousands of workers unless they receive another stimulus. Additionally, US tech stocks dropped after a Democrat-led committee report called the big companies’ monopolies, which means that they could be broken down.
The price of crude oil dropped slightly in overnight trading as traders reacted to the latest inventories data by the American Petroleum Institute (API). The report showed that crude oil inventories rose by 0.95 million barrels in the previous week. Just last week, data from the institute showed that inventories fell by 0.83 million barrels. Also, the price fell even as Hurricane Delta intensified into category four, which risks causing more damage at the Gulf of Mexico. Later today, the EIA will release its inventories report. Analysts expect the data to show that inventories rose by more than 0.25 million barrels.
The US dollar rose against most peers as investors rushed to safety following the stimulus announcement by Donald Trump. It also reacted to a statement by Jerome Powell, who reiterated that the Fed was planning to do more to support the economy. But he also warned that another stimulus was needed to help support the recovery process. Data released yesterday showed that the country’s exports plummeted in August, pushing the deficit to more than $67 billion. Other data showed that the JOLTS job openings declined from 6.9 million to 6.49 million. Later today, the currency will react to the FOMC minutes and statements by other Fed officials.
The EUR/USD declined in overnight trading mostly because of risk aversion. It fell from yesterday’s high of 1.1805 to a low of 1.1731. On the hourly chart, the price managed to move below the green ascending trendline that connects the lowest levels on September 28 and October 2 and 5. The price has also moved below the 25-day moving average while the main and signal lines of the MACD have moved below the neutral line. As a result, the pair is likely to continue falling as bears attempt to move below 1.1700.
The GBP/USD pair dropped to an intraday low of 1.2865. On the hourly chart, the price is along the lower side of the Donchian channel. It also moved below the rising trendline and the 25-day moving averages. The RSI also declined and moved closer to the oversold level. Importantly, the pair seems to be forming a bearish pennant pattern, which means that it could continue falling as bears aim for the next support at 1.2850.
The XAU/USD pair dropped to an intraday low of 1873 after Trump halted stimulus talks. The four-hour chart shows that the price managed to break-out below the rising green. The price also managed to move below the 25-day and 15-day moving average while the force index remains below the neutral line. Therefore, the pair will likely attempt to pare back these losses before resuming the downward trend to the next support at 1845.