Weekly Market Analysis — Oct 11: Will stimulus be approved?

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TradeConnect
Oct 12 · 5 min read

Highlights:

  • Dollar on the defensive amid stimulus talks and FOMC suggestions of low rates until 2023

The Week Ahead:

It was all about Donald Trump’s health and stimulus talks last week. The volatility associated with these two events pushed the dollar down, and its major competitors, including euro, pound and gold broke critical resistances.

Is it time for further weakness in the dollar index? Only time will say, but as for now, markets are favoring riskier assets and safe investments.

On Wednesday, the Federal Reserve minutes suggested that the United States’ interest rates won’t be raised at least until 2023. Too much time to sustain the dollar at current levels.

Besides, Wall Street sees Joe Biden as the winner of the upcoming elections in the United States. Analysts expect the Senate to change color by a 70 percent of probabilities, too. It would be a Democratic president with a Democratic Senate, a combination that is no longer feared in Wall Street.

Given that Republican candidate and incumbent President Donald Trump stands for a little monetary stimulus to the US economy, but Democratic Joe Biden supports a bailout to help and boost economic growth. The market watches a Biden victory as a more favorable option that would bring a bigger stimulus sooner or later.

So, the cocktail for a weak dollar is served. However, don’t forget Trump’s reluctance to accept defeat, and the US would experience a contested election, which would be a risk aversion catalyst.

Forex: Dollar confirms downside; EUR and GBP above key levels

Dollar closed its second negative week in a row. But the most significant event was the breaking and closing below the 93.30 area, where October 6 low and the 50-day moving average lie.

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DXY daily chart by TradeConnect

With the DXY now testing the 93.00 support, euro and pound are gaining ground. The EUR/USD closed the week above the 1.800 significant level and technical studies now suggest further gains. The 1.1900 is waiting for the EUR/USD.

GBP/USD consolidated levels above 1.3000; however, the market doesn’t believe too much in the upside as the Brexit talks between the UK and EU deadline is October 15. Watch for a volatile Cable next week.

Stocks: Wall Street would welcome a Biden victory

Recent surveys suggest that Joe Biden will be the next US President by a 75 percent of probabilities. Also, the odds say that the Senate would change colors to Democratic. As markets perceive the blue party as a pro-bigger stimulus package, Wall Street performed substantial gains in the week.

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DJIA daily chart by TradeConnect

The Nasdaq Composite closed the week sharply higher with gains of 4.56 percent to close at 11,579.94. The DJIA finished the week at 28,586.90 after gaining 3.27 percent in the period. Finally, the S&P 500 ended the five days at 3,477.13, which is 3.84 percent positive.

Commodities: Gold and Silver on a solid note

Last week gold and silver set the case for more bullish movements in the coming weeks, especially after the Federal Reserve suggested that the US’s interest rates would remain low for the next two years. It is bearish for the dollar, which is bullish for gold and silver.

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XAU/USD daily chart by TradeConnect

Gold closed above the critical 1.920 level on Friday, charts now look bullish, and markets expect further gains, especially if the stimulus is approved. Silver, in the same line, accelerated on Friday and closed with significant gains above 25.00. Experts believe that 26.00 is a matter of time.

Cryptocurrencies: Bitcoin ready to take advantage of stimulus

Yes, it looks like the US stimulus is everywhere, and it is. Bitcoin rallied in the past when Congress approved the previous stimulus package, and experts expect the same this time. Bitcoin topped 11,000 for the first time in nearly three weeks.

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BTC/USD daily chart by TradeConnect

Crypto markets changed their mood on Thursday as investors welcomed Fed’s minutes on low-interest rates and resume of stimulus talks. The second wave of COVID-19 cases in Europe and Asia would fuel remote banking and blockchain technologies across the globe.

Crypto accumulation is becoming trendy as payments company Square put 1 percent of total asses in Bitcoin as reserve. Square acquired 4,709 BTC on Thursday.

In summary: Show me the money!

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VIX daily chart by TradeConnect

It seems that the market is shouting to Congress “show me the money!” as investors use any pro stimulus news and talk as a bullish event. However, don’t forget that new economic data will test economic recovery this week.

  • Monday: Producer price index in Japan, and Foreign Direct Investment in China,

Our weekly market analysis is a community contribution and is provided for information and educational purposes only. This content should not be considered a recommendation of investment or trading advice and past performance is not indicative of future outcomes. Know the risks involved when trading.

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TradeConnect

TradeConnect is a multi-asset trading network that connects traditional financial markets and cryptocurrency markets into a single, easy-to-use digital trading platform where you can use bitcoin or ethereum to trade Forex, Stock Indices, Commodities, Crypto and Futures markets

TradeConnect

Written by

The multi-asset trading network that connects crypto traders with global financial markets using bitcoin and ethereum as collateral.

TradeConnect

TradeConnect is a multi-asset trading network that connects traditional financial markets and cryptocurrency markets into a single, easy-to-use digital trading platform where you can use bitcoin or ethereum to trade Forex, Stock Indices, Commodities, Crypto and Futures markets

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