Market Outlook

ZFX analyst Jacob Leung said that weak dollar and higher commodity prices are the typical outcomes from those stimulus measures in the US, at least according to the experiences in 2009 to 2011. We should have a look at Bitcoin, that has been pushed up to $26000-27000 level, reflecting the hedging needs and the distrust of those main central banks in the world.

Overall, the risk appetite from the $900 billion of the coronavirus stimulus bill was overshadowed. In other words, it may be a typical “buy the rumor sell the news” as such “bullish” has been “priced in”. The dollar, which is deemed as the only “relative” safe haven, may go further stronger if the uncertainties remain.

However, what is doubtful to the investors is that the deadline of the negotiations between the UK and EU has been postponed again and again. Both sides decided to continue the negotiation for the Brexit agreement on Sunday, causing a gapping up of the Pound this week. They agreed to put last every effort to reach the deal. So now, the investment market is again optimistic that an agreement of Brexit can be made finally within this week.

European stocks are expected to open lower as well, following the momentum of Asian session. The market focus now is the UK-EU talks over the Brexit trade deal, weighing on the risk appetite. ZFX analyst Jacob Leung said that the markets are quite “struggling” despite the bullish move in the US session last Friday. “Hard Brexit” would likely be the key uncertainty this week.

ZFX analyst Jacob Leung said that, the positive progress of Covid-19 vaccine development weakened the safe haven demand for gold obviously these days, pushing the gold price down around $200/Ounce. Such a sharp rebound of gold price may include technical correction, which means that we can’t be so optimistic in the short term, especially near $1830-$1840 big resistance area.

Oil market should be one of the focus recently. The coronavirus vaccine effectiveness, a weaker dollar, and the better economic figures are all driving such risk-on rally in oil prices. On the other hand, gold price tested $1800 level in previous sessions. Even gold price bounced back a bit on Wednesday, traders were still cautious. ZFX analyst Jacob Leung said that, there is obviously a resistance near $1820 level, triggering a fast retreat on Wednesday.

Riskier currencies gained on Tuesday as investors are now rebalancing their portfolio after the rebound of the dollar. ZFX analyst Jacob Leung said that, the economic data in the US was just favorable the greenback in a very short term, based on the economic recovery prospective. However, after digesting the news all around, positive sentiment hurts the safe-haven dollar.

ZFX analyst Jacob Leung said that, even the vaccine sounds very positive to the market, however, investors may realize that the economies cannot be recovered as fast as expected. The market may has already “priced-in” such situation if we look at the current level of all indexes around the world. And, that may be why investor nerves are always being tested.

Gold price was the other focus on Monday as it tumbled over 5%, as much as $100 per ounce, after the positive development result. The sell-off pressure was mainly related to the risk appetite in the whole financial market, that significantly lower the safe haven demand for Gold. Furthermore, the news lowered the dovish expectation from Fed, even the other central banks, a more aggressive approach in the monetary policies, boosting the greenback. The dollar index bounced back from around 92 level, steadied at around 92.7 on Tuesday.

ZFX analyst Jacob Leung said that, the weak dollar showed risk-on condition in this moment, but be aware that it may be a very volatile week, especially the NFP is coming ahead, and the arguments regarding the US election have arisen.