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27 October 2020

Markets licking their wounds from covid-related rout, US data eyed

The dollar is attempting a recovery and S&P 500 futures are advancing after the index fell by 1.86% on Monday. The rout was triggered by growing concerns about increasing coronavirus cases in Europe and the US. Restrictions imposed across the old continent have yet to result in meaningful drops in infection rates.

German Chancellor Angela Merkel told the nation that difficult months are coming and is reportedly considering a light form of lockdown. The German IFO Business Climate declined in October despite the country’s relatively moderate hit from the second wave. France, Spain, Belgium, and the Netherlands are struggling. Tensions are rising ahead of Thursday’s European Central Bank decision.

US COVID-19 cases came out lower than in previous days in Monday’s report, typical to weekend figures. Several states are reporting strains on hospitals.

The US Congress is now adjourned until after the elections, seemingly slamming the door shut on the chances for an accord of fiscal stimulus and weighing on markets. Senators approved Amy Coney Barrett to the Supreme Court, in a move strengthening the conservative majority in the nation’s highest court, and ahead of what could turn into a contested election.

The economic calendar features two significant releases. First, Durable Goods Orders for September are forecast to show a moderate increase in investment. The data feeds into third-quarter Gross Domestic Product statistics published later in the week, Later, the Conference Board’s Consumer Confidence report for October is projected to show a moderate increase, signaling stability in consumption. Concerns about the elections could also surface.

WTI Oil remains under the $40 level but has clawed its way back up.

Gold is also moving back up, topping the $1,900 level but largely staying in familiar ranges.

GBP/USD Daily Forecast – Support At 1.3000 Stays Strong

Technical Analysis

Yesterday, GBP/USD tested the support level at 1.3000 but did not manage to gain additional downside momentum. Currently, GBP/USD is trying to settle above the nearest resistance level at 1.3030.

In case GBP/USD manages to settle above this level, it will head towards the next resistance at 1.3070. A move above the resistance at 1.3070 will open the way to the test of the next resistance level at 1.3110.

If GBP/USD is able to get above 1.3110, it will develop additional upside momentum and head towards October highs near 1.3180. RSI is in the moderate territory so there is plenty of room to develop momentum in case the right catalysts emerge.

On the support side, the nearest support level for GBP/USD is located near the 20 EMA at 1.3000. If GBP/USD moves below the 20 EMA, it will gain additional downside momentum and head towards the next support at the 50 EMA at 1.2970. A move below the 50 EMA will signal that GBP/USD will try to establish a new downside trend.

Crude Oil Futures: Scope for further downside

Open interest in crude oil futures markets reversed two consecutive daily drops and gained nearly 8.6K contracts on Monday in light of preliminary readings from CME Group. Volume followed suit and rose sharply by around 174.2K contracts, also following two pullbacks in a row.

WTI looks supported by the 200-day SMA near $37.50

Prices of the barrel of WTI met support near the $38.00 mark at the beginning of the week amidst rising open interest and volume. Against this, extra decline remains on the table although the 200-day SMA in the $37.50 region is expected to offer solid contention.

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