Daily market update - what next for the dollar? - Tigerwit Africa

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Daily market update – what next for the dollar?

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The dollar weakens further on Tuesday as traders await the next action from the Fed amid swift economic recoveries despite rising global Covid-19 cases.

The US-Sino affairs run mildly underneath while political tensions surge in the US ahead of the November general elections in the world’s biggest economy. EURUSD hits a fresh weekly high and GBPUSD bounced from the dovish Brexit effect. Meanwhile, the equities markets remain firm following rebounds that followed the current bearish move. US equities are up 2-3% in the last 7 days while the Asian and European stock markets have also turned higher. The Japanese Yen gained across the board on Monday as the country’s governing party selected a new leader to succeed the outgoing Shinzo Abe. USDJPY hits a fresh September low as a result of this and a weaker Dollar.

In the commodities market, risk-off returned on Monday as Gold hits 1969 – highest in nearly the last two weeks. The Oil market remains under pressure with Brent struggling to float above $40. The black gold is down by over 6.5% in September on fears of Covid second wave.

Looking ahead, traders and investors will focus on Wednesday’s FOMC meeting. How will the Fed react to the Covid-19 second wave? Will the bank expatiate on its last month average inflation rate policy? In addition, traders and investors will most probably get a clearer picture as to the current state of the economy. Let’s take a look at the current price pattern and important levels across the major instruments.

S&P 500 contracts. What next?

The S&P 500 has been range-bound since the massive September 2-4 decline. Since the dip to 3350, the stock index rallied a bit before making a new low just below 3300. However, the bearish stock market has stabilized and momentum seems to be building. The question now is this: in what direction?

From technical standpoint, it seems US equities will make one lower leg. S&P 500 completed a bearish triangle pattern just above 3400. Unless the price breaks above 3448-3500 critical zone, more decline is high likely to 3255 and 3162 Fibonacci support levels before the bullish trend resumes to fresh all-time high.

DXY drops below 93. When will the recovery continue?

The dollar remains under the bearish pressure after a quick breakaway early September. the greenback gained across the board as the index gained over 2% in just about a week. The long-term trend remains bearish. However, the current bullish correction from 91.77 is expected to stay longer and surge toward 94-95. However, before that could happen, the bulls have to overcome the current dip which is a correction of the 91.77-93.67 jump. Therefore, the price will most probably touch 92.67 and 92.44 in the short-term before the lift. The dollar weakness is expected to continue before the FOMC meeting on Wednesday.

Gold hangs in a triangle

The yellow metal hits the roof of a triangle pattern and is looking exhausted at the moment. 1992 and 2016 resistance levels can be tested if the price breaks the triangle to the upside. If the current 1965-1970 holds, the metal should drop toward the base of the pattern below 1920. A bearish break below the 1906-1902 would be devastating for the bulls as a sharp decline toward 1800 would follow.

WTI rebounds from a 6.5% decline

Oil prices fell off a 10-week bullish wedge pattern. From the start of September, Brent and WTI have fallen over 6.5%. Last week, a minor bullish correction started but the heavy bearish pressure is still very strong. As the chart shows,  the bounce will continue to $39, $40 or even $41 for the WTI. If the expected rally is corrective, the bearish run will be expected to resume toward $32.

(All charts used are from TradingView)

Disclaimer: This communication is for informational purposes only and should not be viewed as any form of recommendation as to a particular course of action or as investment advice. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Opinions, estimates, and assumptions expressed herein are made as of the date of this communication and are subject to change without notice. This communication has been prepared based upon information, including market prices, data, and other information, believed to be reliable; however, TigerWit does not warrant its completeness or accuracy. All market prices and market data contained in or attached to this communication are indicative and subject to change without notice.

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