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05 October 2020

Optimism about Trump’s potential discharge lifts markets, stimulus news eyed

President Donald Trump’s doctors painted an upbeat picture on Sunday, saying the Commander-In-Chief is improving. Trump later released a video and did a short drive-by, waving to supporters outside the Walter Reed hospital.

However, the physicians also revealed that the president is receiving an aggressive treatment reserved for severe coronavirus cases, raising doubts about his health. Trump’s doctor Sean Conley was forced to clarify some of the comments he made on Saturday regarding oxygen support.

Brexit: UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen spoke over the weekend and agreed to extend talks on future relations. The pound is rising, yet remains hesitant due to the lack of details on a breakthrough. The EU took legal action against the UK last week.

The US economy gained 661,000 positions in September, worse than expected, and the Unemployment Rate fell to 7.9%, exceeding estimates. The last Non-Farm Payrolls statistics ahead of the elections were drowned by the news of Trump’s illness.

Gold has retreated from the highs above $1,900 and trades just below that round number. Oil prices have failed to recover the losses incurred on Friday and remain sensitive to politics.

EUR/USD Price Analysis: Battling 50-HMA after falling wedge breakout

EUR/USD is off the highs but remains better bid above 1.1700, as the US dollar remains on the back foot amid the upbeat market mood.

The optimism over US President Donald Trump’s potential discharge from the medical center boosts the appetite for the risk assets at the expense of the safe-haven greenback.

From a near-term technical perspective, the bulls are catching a breath following a nearly 30-pips bounce from daily lows of 1.1709, courtesy of the falling wedge breakout confirmed on the hourly chart.

Despite the bullish breakout, the spot is struggling to extend the rise above the horizontal 50-hourly Simple Moving Average (HMA) at 1.1730.

A sustained move above the latter could open doors once again towards the pattern target of 1.1793. However, the October 1 high of 1.1770 could test the bulls’ commitment en route the aforesaid pattern target.

The hourly Relative Strength Index (RSI) has turned south at 51.94, suggesting that the bullish momentum could weaken in the coming hours.

The immediate downside could be capped around 1.1725/20, which is the confluence of the 21 and 100-HMAs.

On a failure to resist above the latter, sellers could target the pattern resistance now support at 1.1710.

The horizontal critical 200-HMA support at 1.1692 is the level to beat for the EUR bears.

USD/JPY Forex Technical Analysis – Retesting Main Retracement Zone at 105.526 to 105.885

Futures on the Dow Jones Industrial Average climbed about 200 points. The S&P 500 futures and the NASDAQ 100 futures both rose about 0.7%. These moves encouraged investors to shed the safe-haven Japanese Yen in favor of the U.S. Dollar.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the USD/JPY is likely to be determined by trader reaction to the main 50% level at 105.526.

Bullish Scenario

A sustained move over 105.526 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the minor top at 105.804, followed by the main Fibonacci level at 105.885. The latter is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 105.526 will signal the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into Friday’s low at 104.944, followed by the minor 50% level at 104.903. The latter is a potential trigger point for an acceleration to the downside.

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