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16 October 2020
Dollar dominates amid stimulus and Brexit uncertainty, ahead of US retail sales
Fiscal stimulus: President Donald Donald Trump wants a large relief package Congress, above $1.8 trillion already offered. However, Senate Republicans are willing to allow for only $500 billion and House Democrats want $2.2 trillion.
Brexit: UK Prime Minister Boris Johnson is set to announce his decision on whether to continue or abandon talks on future relations, and GBP/USD is on the back foot.
EU leaders agreed to extend talks with the UK but did not say they would “intensify them.” Moreover, Brussels expects a move from London to state aid and fisheries. Britain’s Chief Negotiator David Frost expressed disappointment. If Johnson opts to continue talking, the pound would rise.
Eurozone coronavirus cases continue rising with several countries and regions tightening restrictions in a bid to halt the spread. Jens Spahn, Germany’s Health Minister, said his country’s contact tracing capacity is reaching its limits. Paris and other cities will come under a nighttime curfew. The recent spikes are weighing on the euro and also on global markets.
US elections: With the clock ticking down to the elections on November 3, chances are falling and the safe-haven dollar is on the rise while stocks are hesitating. Former Vice-President Joe Biden maintains his large lead in national and opinion polls against Trump. Both men participated in parallel televised townhall events which probably did little to move the needle.
Democrats have a chance of winning the Senate, opening the door to a quick and large stimulus that investors want. However, the race for the upper house is tighter and markets also fear higher taxes and regulation.
Gold has been edging higher, topping the $1,900 level.
US retail sales figures for September are set to show moderate rises after August’s statistics fell short of estimates. The previous release triggered accelerated talks on Capitol Hill, but the limited timetable implies low chances of a deal. Nevertheless, consumption is key to the US economy.
Later in the day, the University of Michigan’s preliminary Consumer Sentiment Index for October is forecast to remain around the 80.4 figure recorded in September. It is also a gauge of the mood ahead of the vote.
Gold Price Analysis: XAU/USD levels to watch ahead of critical US data – Confluence Detector
Gold: Key resistances and supports
The Technical Confluences Indicator shows that the yellow metal is stuck in a narrow range so far this Friday, now confronting the immediate upside barrier at $1910, which is the convergence of the previous day high and Bollinger Band 15-minutes Upper.
The next significant resistance is seen at $1912.50, the intersection of the previous high on four-hour and SMA5 one-day.
Only a sustained move above the latter could revive the bullish momentum, as the buyers aim for $1917, the Fibonacci 23.6% one-week. Further up, the pivot point one-day R2 at $1922 could likely challenge the bulls’ commitment.
On the flip side, a move below the dense cluster of support levels around $1904/02 would trigger a fresh leg down in the spot. That confluence area comprises of Fibonacci 38.2% one-month, SMA5 four-hour and SMA200 one-hour.
The next soft downside cap is aligned at $1985, where the SMA100 four-hour coincides with the Fibonacci 61.8% one-week.
A powerful support of the Fibonacci 23.6% one-month at $1883 is the level to beat for the bears
https://www.investing.com/charts/futures-charts
Oil: Demand concerns and risk related to US elections to send WTI lower to $36 – TDS
“Following an upbeat week, crude oil stocks again added a positive tone as crude oil inventories dropped another unexpectedly large 3.88 million bbls vs a predicted 2.1 million decline. Adding to this positive is the unexpectedly large 7.2 million bbl distillate stocks decline and the 1.6 million bbl gasoline inventory drop. With exports falling by 524K bpd and imports dropping imports 446K bpd, the trade side of the report was more or less neutral.”
“With the US no longer pursuing a new fiscal stimulus plan which has any chance to be ready before the election, the second wave of COVID-19 is once again reducing economic activity and oil consumption projections. As such, significant crude oil upside is not expected for now.”
“I suspect that WTI will have a hard time to move much above resistance near $41/bbl, at least in the near-term. And, there is a risk that election-related uncertainty may send it even lower to support just under $36/bbl.”
With OPEC+ set to add millions of barrels of crude oil to the global market next year, even as concerns surrounding demand grow – OPEC, the IEA and EIA all suggest additional OPEC supplies in early-2021 would create large surpluses – it won’t take much for crude to move back towards recent lows. However, the market is looking for a suspension of the planned OPEC+ deal tapering, which could be one catalyst for oil to gravitate higher.”
https://www.investing.com/charts/futures-charts
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