- September 22, 2020
- Posted by: Analysis Team
- Category: FOREX, Technical Analysis
Global stocks tumbled as investors worried about a new wave of lockdowns. In the United States, the S&P 500 dropped for the fourth consecutive day while the Dow Jones lost more than 500 points. In Asia, most indices are in the red, with the Hang Seng and the Shanghai composite falling by more than 0.50%. The same is happening in Europe, where futures tied to the DAX index, FTSE 100, and CAC 40 are all in the red. Investors are worried about the rising number of cases in some countries and the potential for new lockdowns. The stand-off in Washington about a new relief bill has also contributed.
Technology companies are among the most affected in the current sell-off. This is partly because of the rising tensions between the United States and China. According to the Wall Street Journal (WSJ), China has created an entity list that will punish some leading American firms. The idea for the list started in 2019 when the US restricted Huawei’s access to Chinese components. They have now escalated this with the current crisis about TikTok, the social media giant. Companies in the Chinese entity list will be banned from selling, buying, and even investing in the country.
The US dollar rose against most currencies because of the rising risks in the market. These risks include the likelihood of new lockdowns, especially in the United Kingdom. Also, the delay of a COVID vaccine and the upcoming elections have also played a part. It also reacted to the upcoming testimony by Jerome Powell, the Federal Reserve chair. In prepared statements, he will tell congress that many small businesses may need direct fiscal support, rather than loans from the central bank. In addition to his testimony, we will today receive the existing home sales and the Richmond manufacturing index.
The EUR/USD pair declined to an intraday low of 1.1736, which is along the important support shown in yellow. The price attempted to bounce back and is now trading at 1.1770. On the four-hour chart, the price is below the 25-day and 50-day exponential moving averages. The RSI is slightly above the overbought level of 30 while the DeMarker indicator has moved below the oversold level. Therefore, a move below the support at 1.1736 will be a victory for the bears, who will push the price lower.
The GBP/USD pair declined as the number of COVID cases continued to rise in the UK leading to a 10 pm curfew. It is trading at 1.2822, which is close to the lowest level on September 15. It is also slightly below the 25-day and 50-day exponential moving averages. Also, the price has moved below the bearish flag pattern that formed a few days ago. Therefore, the pair is likely to keep falling with the next support at 1.2800.
The AUD/USD pair declined to an intraday low of 0.7200 in overnight trading. On the four-hour chart, the price is below the 25-day and 50-day moving average. It has also moved below the previous consolidation range shown in green. Also, the Chaikin oscillator has remained below the neutral line. Therefore, the pair is likely to continue falling today as bears aim for the next resistance at 0.7150.