US stocks slump takes a breather but potential risks remain
US stocks saw small gains yesterday, as concerns about the economy remained. The S&P 500 and Dow Jones rose by 0.3% and 0.2%, respectively. The gains yesterday were led by technology companies like Microsoft, Apple, and Tesla. Still, investors expect that stocks will remain volatile ahead of the US election. For example, a poll by the American Association of Individual Investors showed that 46% of them expect stocks to fall over the next 6 months. The gains made yesterday were possible because of strong data from the commerce department. The numbers showed that home purchases rose to a 14-year high in August.
The euro rose slightly against the US dollar in overnight trading. These gains helped erase some of the losses made this week. Today, the currency will react to financial data from the European Central Bank. The bank will release the private sector loans, loans to non-financial corporations, and the M3 money supply data. Also, the euro will react to the French consumer confidence data and factory-gate prices from Sweden. These numbers will come a day after data from Germany showed that the business climate and current assessment rose by a smaller rate than earlier expected.
The US dollar declined slightly in overnight trading as the market reacted to the new home sales data from the US. The data showed that new home sales increased by 4.8% in August after rising by 14.7% in the previous month. The total number of homes sold was more than 1.01 million, better than the 895k that analysts were expecting. Today, the currency will react to durable goods data from the US. Elsewhere, the Canadian dollar will react to the budget balance data, which shows whether the country has a budget surplus or deficit. Also, the British pound will react to the public sector borrowing data.
The EUR/USD pair rose to an intraday high of 1.1667, which is slightly higher than yesterday’s low of 1.1626. On the daily chart, the price is still below the neckline of the head and shoulders pattern. It is also below the 25-day and 50-day exponential moving averages while the RSI is moving in a downward trend. The price is also along the 23.6% Fibonacci retracement level. Therefore, even with the overnight gains, the pair seems to be in a downward trend, which means that bears are likely to eye the 38.2% retracement at ~1.1500.
The GBP/USD wavered in overnight trading. It is trading at 1.2756, which is a few pips above yesterday’s low of 1.2672. On the four-hour chart, the pair seems to be forming a bearish pennant pattern, which is usually a sign of continuation. It is also slightly above the 61.8% Fibonacci retracement level and slightly below the 25-day EMA. Therefore, the pair is likely to continue falling as bears aim for the next resistance level at 1.2700.
The NZD/USD pair rose to an intraday high of 0.6558, which is higher than this week’s low of 0.6510. On the four-hour chart, the price is significantly below the 25-day and 50-day moving averages. It is also below the important resistance level of 0.6600. The signal and main lines of the MACD have also started to rise. Therefore, while the pair is likely to make some gains, the overall trend remains bearish.