16.11.2020: Market sentiment improves: outlook for USDX, USD/JPY, AUD/USD
Once again the new trading week has kicked off with the news about the creation of the vaccine. This time, Joe Biden announced his intention to meet with vaccine developers due to a significant deterioration in the epidemiological situation across the country. The number of new cases reached 11 million on Sunday, a million more than a week earlier. It was also the fastest increase since the beginning of the pandemic.
The US dollar is losing ground despite its safe-haven asset status. The US dollar index, which measures the strength of the greenback against a basket of six major currencies, went down below the level of 92.60. The US currency is extending losses amid the rising euro and the pound sterling in anticipation of the EU summit. During the meeting, London and Brussels are expected to sign a trade agreement.
Meanwhile, Wall Street added gains amid the successful launch of Elon Musk’s SpaceX rocket as well as the end of the US presidential election. Donald Trump on Sunday briefly conceded defeat in the election but soon changed his mind and vowed to continue the legal battle. This news had little effect on market sentiment and the US indexes soared up.
However, the Japanese yen was unaffected by a rally in the stock market. Usually, the rise of the US stocks leads to an increase in the dollar/yen pair. It seems that investors have factored in Japan’s GDP data. According to this report, the Japanese economy bounced back from the recession in the third quarter. Technical analysis experts insist on the resumption of the downward movement to the target of 104.05 and further to 103.18. There may also be short-term spikes if the pair rebounds and moves above the resistance level of 104.75.
Yet, risk appetite may return to the market thanks to a string of news. For example, top officials from 15 countries in the Asia-Pacific region signed one of the largest free trade deals in history, covering 2 billion 200 million people and 30% of the world economy. What is more, in October, China’s economy gained momentum boosted by the rebound in the manufacturing sector, retail sales, and investment in fixed assets.
The Australian dollar exhibited strength amid this news. The AUD/USD pair is trying to develop a rally to the strong resistance level at 0.7375, a new record high.
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