Weekly Market Analysis — Sep 20: US Elections to take focus
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Highlights:
- Presidential race heats up as candidates debate replacement of RGB
- WeChat ban causing legal battle for Trump
- TikTok remains in the US amid deal with Oracle & Walmart
- Realized correlation between Bitcoin & Gold at 1-year highs
- Critical data & Parliament in UK to determine the fate of British pound
- Experts highlight how economic recovery in China is broadening
- Central banks in NZ and Switzerland take the stage
The Week Ahead: US elections to take the focus; BTC is perceived as value store
Last Friday, Supreme Court Justice, Ruth Bader died at the age of 87, after a lifetime of achievements such as being the second female in the US highest court. Ginsburg died and left vacated one of the chairs in the Supreme Court, and now President Trump wants to pick her replacement ASAP. Democrats and presidential candidate Joe Biden oppose this decision in line with the same situation they experienced four years ago when the Republicans opposed Obama’s designation.
Democrats believe the decision should wait for the next president.
So, the presidential race is now more than alive and fulfilling all the headlines in the United States. From now on, most traders will trade the US election and its potential effects in USD, US-China relationship, and Wall Street.
Meanwhile, President Trump just opened another battlefield against the court as a judge in California halted the White House’s decision to ban downloads of WeChat. In the same line, TikTok remains online in the US as the Chinese company reached an agreement with Oracle and Walmart.
We lived a volatile period in the financial markets last week. Brexit’s news and decisions from the Fed and the Bank of England influenced markets and moved to fresh highs and lows. However, most instruments finished the period close to their opening prices.
Meanwhile, crypto evangelization continues as more mutual funds and investment firms continue to buy cryptocurrencies.
Forex: The game of the weakest currency
It could be another chapter of a currency war where every country tries to push down its currency, but no, it is more than that. Although some experts believe that the economic recovery in Europe is weaker than the one in the United States, the euro doesn’t fall. The reason is the weakness in the USD after the Fed comments on low rates until 2023.
The euro is depressed, but the dollar bulls are missing in action.
GBP/USD stopped its recovery at 1.3000, and it looks like Brexit will not allow more gains beyond that point. USD/JPY continues with its free fall and expectations are for a test of lows since March at 104.18. AUD/USD remains sideways. A catalyzer will be the monetary policy decision in New Zealand
Stocks: The tech sell-off continues
Stock traders all over the world are watching talks regarding stimulus packages closely. It is happening in the US, Europe and Asia.
In America, slow talks between Democrats and Republicans are hurting market sentiment, and tech stocks continue with their sell-off. Facebook closed 5.2% down, Apple 4.61% negative, while Tesla recovered 18.63% in the week.
S&P 500 and Nasdaq closed down, DJIA changed little but remains green. In China, stocks closed up on stimulus hopes. CSI300 and SSEC both gained 2.4%.
Keep in mind that, according to BNP Paribas analysts, China economic dynamics continued its improvement in August. In fact, “the return to normal levels of activity in a large number of industrial sectors therefore seems to be complete.”
Commodities: make it or break it time for gold
Gold started the week with gains, but the metal remains below 1.950. The metal was hurt by the Fed last week and a better than expected stance in the US economy. It didn’t matter how weak the dollar was, but the optimism in markets reduced buying interest in XAU/USD.
The same history for silver as investors are weighting on its correlation with gold. However, a better economic sentiment can push the metal above the 27.00 level first, and then 28.00 resistance.
According to Data Analytics and Trade Execution provider Skew, realized correlation between Gold and Bitcoin had reached a one-year maximum at 76.3% this week. According to experts, it might suggest that investors now perceive BTC as a store of value and kind of safe haven or at least, a safe investment asset.
That could be a good explanation of MicroStrategy bet on Bitcoin holdings.
Cryptocurrency: Major cryptos open the week under pressure, but interest persists
Last week, business intelligence company MicroStrategy reported that they purchased 175 million dollars in Bitcoin, or 16,796 BTC, to increase its crypto portfolio to 425 million dollars, inclusive of fees and expenses.
In that line, the Bitcoin position in MicroStrategy equals 30% of its 1.38 billion of its current market. The company highlighted the uncertainty in the US dollar as one of the significant catalyzers in the decision.
BTC/USD is trading negative on Monday after the pair rejected the 11,183 area, near to the 50-day moving average. Ethereum lost its battle against the 400.00 level, and it is now trading down at 370.00. At the same time, Litecoin is testing a critical 200-day moving average at 46.96.
In summary: Stimulus packages and US elections
The week ahead, markets will be focused on talks about stimulus packages around the world. Keep in mind that with another war in the US Congress due to the SCOTUS designation, it could add more delays in the decision of the anti-COVID help.
Monday: Inflation report in the UK parliament will affect the GBP/USD.
Tuesday: Quiet day in markets, existing home sales would add some volatility to markets.
Wednesday: The Reserve Bank of New Zealand will decide its interest rate. It will be an event that will affect the NZD/USD and the AUD/USD. Expect an attempt to push NZD down. Besides, Markit will publish its traditional PMI manufacturing and service data across the world.
Thursday: Turn to the Swiss National Bank to decide on monetary policy. Keep an eye on it as it could influence the USD/CHF, and therefore the EUR/USD.
Friday: Check durable goods orders in the US for potential volatility ahead of the weekend.
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.
