FOREX-New COVID infections reached new records on both sides

The Dollar Index is rising while risk-related assets are on the backfoot during early Monday trading. The week is starting under the spell of risk aversion as the number of new COVID infections reached new records on both sides of the Atlantic during the weekend, heightening fears over new lockdowns and the economic devastation they cause. At the same time, in Washington, Republican and Democrat lawmakers remain unable to reach an agreement over the size and shape of a much-needed economic stimulus package. It is not surprising that as the second wave of the pandemic engulfs Europe and politicians in the United States continue to squabble, investors look for the comfort of safe haven assets like the dollar.

EUROPEAN SHARES-US House of Representative speaker Nancy Pelosi kept driving stock prices higher

Stocks edged higher on Friday in Europe as a fresh boost was given to market sentiment following encouraging macro data. In addition to the reassuring key manufacturing data, investors also welcomed the last batch of positive earnings from carmakers as well as the banking sector, both respectively boosted by Daimler AG and Barclays PLC. On the other side of the Atlantic, US House of Representative speaker Nancy Pelosi kept driving stock prices higher by suggesting the stimulus deal was getting closer and would likely be reached before the presidential election. The last presidential debate on Thursday brought a very different tone in the exchange between the two candidates, than from the previous exchange. Polls from CNN suggest Biden prevailed in this debate as the candidate could lay down policies regarding Coronavirus, immigration and international relationships. Earnings reports continue to be central in investors’ minds this week, and many will eagerly await results from American Express in the US later today, as well as data from Renault, Air Liquide, Faurecia, Klepierre, Nanobiotix and other European companies.

GOLD-Consolidating just above the threshold of $1,900

Gold spot price is consolidating just above the threshold of $1,900. After an unsuccessful attack to $1,930, the price collapsed below $1,900, but buyers were ready to sustain bullion.

Prices are moving in a relatively tight lateral trading range between $1,880 and $1,930, while yesterday’s decline was curbed at around $1,894 - well above the lower edge of this channel.

From a technical point of view, prices rebounded on the dynamic support that we can obtain drawing together the recent series of lows shown by gold. This is confirming a moderate positive set for the gold price, and a clear break out of $1,930 would be required for any further bullish rally.

FOREX-Debate between Joe Biden and Donald Trump

The dollar is losing some ground to other major currencies during early Friday trading, following last night’s debate between Joe Biden and Donald Trump. Lately, the greenback has been seen as a barometer of investors sentiment, rising at times of uncertainty and dropping when optimism prevails. Interesting therefore that after the final debate between the two presidential candidates ended in a stalemate, which is more positive for the poll leading Democrat candidate, the dollar index failed to signal any sentiment of alarmism in the markets, underscoring the idea that largely investors now see a Biden victory by an undisputable margin as the most benign election outcome.

EUROPEAN SHARES-Following Asian markets and US futures amid global risk

European shares drifted lower on Thursday, following Asian markets and US futures amid global risk aversion sentiment boosted by mounting virus concerns. Stock investors remain stuck in uncertain times, with various market drivers to be considered before making their investment decisions, leading to the current lack of directionality. Whilst the next US stimulus move is already highly anticipated by most traders, most are keeping a cautious eye towards macro data as well as corporate news in order to get more clues on the impact of the pandemic. Today’s trading sessions will be marked by major US data, with initial jobless claims and existing home sales data for September due later today, as well as earning reports from large US groups like Coca Cola, AT&T and Intel. In Europe, stock investors expect more volatility on the CAC-40 index as a batch of results from French-listed companies like Dassault Systemes, Hermes, L’Oreal, Kering, Thales and Michelin are awaited during and after the trading session.

The market went to test its major support zone around 4793 pts shortly after the opening bell, and has successfully rebounded since then. Prices will have to clear the 4,800 pts level in order to unlock the bullish potential towards 4,830 pts on the very short-term. A break out of the 4,772 pts/4,804 pts zone could quickly drive prices deeper towards 4,745 pts and 4,665 pts by extension.

GOLD-Interesting assault to the resistance level at $1,930/1,932

Gold spot price rallied to $1,932 as expectations of further monetary stimulus initially grew in the US, before easing down back to $1,915 after doubts over an imminent deal emerged.

From a technical point of view, there has been an interesting assault to the resistance level at $1,930/1,932, but that level remains firm so far. Investor interest remains huge and every time politicians speak of the possibility of new economic stimulus (maybe even before the US election, so potentially in just a few days) bullion rallies. It is clear the yellow metal is seen in this phase as a rescue anchor in a different scenario. Gold could mitigate portfolio impact in case of a new stock collapse – and this is not a big news – but investors are also seeing bullion as an inflation hedge, in a scenario where central banks are pumping huge amounts of liquidity as they attempt to recover economies.