British pound rises amid new lockdown and no-deal Brexit fears
US stocks pared earlier losses as traders focused on the new shutdowns in Europe and the new stimulus deal in congress. The Dow Jones ended the day up by 0.30%, paring earlier losses that saw it drop by more than 400 points. The S&P 500 and Nasdaq also closed higher than they opened. The volatile session happened as more countries started to distance themselves from the UK, which is apparently seeing a newer variant of coronavirus. Also, volatility was partly because traders were selling the new stimulus deal. In total, congress voted in favour of a $900 billion stimulus offer.
The British pound bounced back in overnight trading even as traders continued to worry about the new virus strain and the possibility of a no-deal Brexit. With parts of the country in lockdown, there is fear that the country will have a double-dip recession. The situation will get worse if the country leaves the UK without a deal. In the morning session later today, we will receive the final reading of Q3 GDP data. Economists expect the numbers to show that the economy contracted by 9.6% in Q3 leading to an annualized increase of 15%. Also, data from the government will possibly show that public debt increased by £27.30 billion in November.
The US dollar held steady as new risks continued to rattle the market. The currency rose against all major peers like the Swiss franc, euro, pound, and the Canadian dollar. Later today, it will react to the final reading of US GDP numbers. Economists don’t expect the numbers to show significant changes from the first and second readings. They see the economy bouncing back by 33.1% in Q3, boosted by private consumption and exports. The US will also release the existing home sales numbers and the Richmond manufacturing index.
The S&P 500 had a relatively volatile session yesterday. It first dropped to a multi-week low of $3,600 and then pared the gains. It is trading at $3,692, where it was on Friday last week. On the four-hour chart, the price managed to move above the ascending yellow trendline. It is also at the same level as the 28-day and 14-day exponential moving averages while the average true range has also started to rise. Therefore, the index may continue rising, with the next resistance being at $3,700.
The EUR/AUD pair dropped to an intraday low of 1.6127, which was substantially lower than the intraday high of 1.6257. On the hourly chart, the price moved below the 38.2% Fibonacci retracement level. It is also at the same level as the 28-day exponential moving average while the fast and slow lines of the Stochastic oscillator have moved to the oversold level. Therefore, the pair may continue falling as bears aim for the next support at 1.6100.
The EUR/USD bounced back in overnight trading as the risk-on sentiment abated. It rose from an intraday low of 1.2130 to the current 1.2243. On the four-hour chart, the pair moved above the 28-day and 14-day exponential moving averages while the signal and histogram of the MACD started a bearish crossover pattern. Therefore, the pair may continue rising as bulls aim for the year-to-date high of 1.2275.