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26 October 2020

Covid concerns and fading stimulus hopes boost dollar, weigh on gold, politics eyed

Coronavirus in Europe: Several European countries reported record COVID-19 infections and growing pressure on hospitals. Among the most significant developments are a caseload of over 50,000 in France and a new state of emergency in Spain. EUR/USD has fallen off the highs around 1.1850. The German IFO Business Climate and Bundesbank’s monthly report are eyed.

US fiscal stimulus: Republicans and Democrats seem to have reached the limits progress was made last week. Politicians began the blame game, apparently trying to score points ahead of the elections. The GOP-controlled Senate is focused on confirming Amy Coney Barret to the Supreme Court.

Elections: The weekend has been thin on post-presidential debate polls, but so far, challenger Joe Biden remains in the lead against President Donald Trump. An inflow of surveys is likely on Monday and Tuesday. Investors are trying to gauge the chances of a “blue wave” – a victory for Democrats in the battle for the White House and Congress, allowing for a generous relief package.

Brexit: Chief EU Negotiator Michel Barnier has extended his stay in London, a sign of progress in talks. State aid and fisheries remain the thorniest issues as both sides aim to seal a deal by mid-November.

Gold has slipped back under $1,900 amid the risk-off mood. WTI oil has also reacted and fallen out of its narrow range amid concerns about global growth.

EUR/USD Daily Forecast – Test Of Support At 1.1830

Technical Analysis

EUR/USD failed to settle above the resistance at 1.1870 and is testing the nearest support level at 1.1830. If this test is successful, EUR/USD will move towards the next support at the 20 EMA at 1.1790.

A move below the 20 EMA will push EUR/USD towards the 50 EMA at 1.1765. If EUR/USD manages to settle below the 50 EMA, it will get to the test of the major support level at 1.1750.

On the upside, EUR/USD needs to stay above 1.1830 to have a chance to develop additional upside momentum. A successful test of the nearest resistance level at 1.1870 will open the way to the test of the major resistance level at 1.1910.

E-mini S&P 500 Index (ES) Futures Technical Analysis – Trader Reaction to 3431.75 Sets the Tone into Close

The direction of the December E-mini S&P 500 Index into the close will likely be determined by trader reaction to the Fibonacci level at 3431.75.

Short-Term Outlook

The direction of the December E-mini S&P 500 Index into the close will likely be determined by trader reaction to the Fibonacci level at 3431.75.

Bullish Scenario

A sustained move over 3431.75 will indicate the presence of buyers. This could drive the index into the 50% level at 3471.75 into the close. Overtaking this level could lead to a test of the minor top at 3508.50.

Bearish Scenario

A sustained move under 3431.75 will signal the presence of sellers. This could lead to a retest of the intraday low at 3402.50, followed by a pair of 50% levels at 3387.00 and 3369.50.

Gold Price Prediction – Prices Drop as Yields Rise Following Jobless Claims Data

Technical analysis

Gold prices moved lower pushing through support near the 10-day moving average at 1,910 which is now seen as short-term resistance. Support is seen near the October lows at 1,872. Short-term momentum has whipsawed and turned positive after recently turning negative as the fast stochastic generated a crossover buy signal on the upper end of the neutral range. Medium-term momentum remains neutral to positive as the MACD histogram prints in the black with an upward sloping trajectory that points to a slow trend higher.

Jobless Claims Rise Less than Expected

US jobless claims totaled 787,000 last week, the lowest total since the early days of the coronavirus pandemic. Expectations had been for claims to rise by 875,000. The total reflected a decline of 55,000 from the downwardly revised 842,000 in the previous week. In addition to the substantial drop in the headline number, continuing claims also showed another hefty decline. The level of those getting benefits for at least two weeks declined by 1.02 million to 8.37 million.

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