Dow notches its best day since 1993 on stimulus hopes
US stocks rose yesterday as investors hoped that a deal in Washington was possible. The Dow rose by more than 11%, notching its best trading day since 1993. The S&P500 rebounded from 2016 low and jumped by almost 10%. Washington leaders are still negotiating about a rescue package that will go to both families and companies. Both Democrats and Republicans agree on the need for a rescue but the challenge is on how to do it. Democrats favour a situation where the funds have strict terms that limit what companies can do with them. For example, they want these companies banned or limited from buying back shares. Meanwhile, Republicans are afraid that companies will reject the terms, which will lead to more layoffs.
The US dollar index ended a 10-day rally yesterday as investors moved to relatively risky assets. The decline started shortly after the Fed announced the new open-ended quantitative easing program, which will see it print trillions of dollars. The biggest gain against the USD came from Norwegian Krone, which had its best day on record. The Australian dollar and sterling jumped by more than 2% even as the UK started a lockdown. Yesterday, data from the US showed that new home sales declined by 4.4% in February after rising by 10.5% in January. The manufacturing PMI declined from 50.7 to 49.2.
The role of economic data has been relatively limited because most of it is lagging indicators. For example, data from February will do nothing because of how much things have changed. For example, we will receive the February consumer and producer price data from the UK today. The headline and core CPI are expected to have risen by 1.7% and 1.6% respectively. Still, traders will be focused on the current lockdown and its impacts on the market. We will receive German business expectations and durable goods orders from the US.
The EUR/USD pair rose by a few pips in the Asian session. The pair is trading at 1.0804, which is slightly below yesterday’s high of 1.0890. On the hourly chart, we see that the pair is attempting to breakout in an upward trend but has found some resistance as shown with the red arrows. The pair has also failed to move below the support of 1.0635. There are three potential scenarios today. First, the pair may remain inside the current channel. Second, it may breakout past yesterday’s high of 1.0890 or retest the previous low of 1.0635.
The XBR/USD pair rose by more than 3.65% in the Asian session as traders hoped for more demand. The pair is now trading at 30.37, which is significantly higher than the YTD low of 25.63. On the 30-minute chart, this price is between the 38.2% and 23.6% Fibonacci Retracement level. It is also slightly above the 14-day and 28-day exponential moving averages while the RSI has moved higher. The pair may attempt to retest the previous swing of 32.35.
The SPX500 index had one of its best days yesterday. However, futures have declined slightly and are trading at $2,408, which is below yesterday’s high of $2,456. On the 30-minute chart, the index is along the 14-day EMA and slightly above the 28-day EMA. The index has also formed a triangle pattern, which is shown by the blue lines. Today, the index’s movements will depend on the news from Washington. Positive news could make it retest the important resistance of $2,500.