Global stocks rise, dollar falls as political risks rise
Global stocks tumbled as traders continued to worry about the rising coronavirus cases and the ongoing political divisions in the United States. In Europe, the DAX and Stoxx 50 declined by more than 3.5% while in the United States, futures tied to the Dow Jones and the S&P 500 index fell by more than 2%. Globally, the number of coronavirus cases has continued to rise and some cities, including London, have started to consider restrictions on movement. At the same time, a number of companies that are developing vaccines have warned that the process will take longer than expected. The stocks also declined because of the rising political temperatures in the United States.
The British pound declined sharply against the Us dollar as traders continued to worry about the rising number of coronavirus cases in the country. The country has so far confirmed more than 394k infections and more than 41,000 new deaths. Yesterday, health officials confirmed close to 4,000 new cases as the number of deaths rose by 18. According to the media, the government is now considering a mini national lockdown to act as a ‘circuit-breaker’. The market is also worried about Brexit as the time for a deal runs out.
The US dollar rose against key currency pairs ahead of an important testimony by Jerome Powell. The currency has risen by 1.1% against the Swedish krona, 0.4% against the Swiss franc, and by 0.5% against the US dollar. In the two-day testimony, Powell is expected to talk about the measures the bank is taking to cushion the economy from the impacts of the virus. He is also expected to talk about the need for more fiscal stimulus from Congress.
The EUR/USD pair declined by more than 0.5% today, mostly because of the stronger dollar. It is trading at 1.1776, which is the lowest it has been since Thursday last week. It has also managed to move below the lower line of the ascending trendline. It is trading below the 50-day and 25-day moving averages. Therefore, the pair is likely to continue falling but bears will need to move below this month’s low of 1.1750.
The GBP/USD pair is down sharply today as the UK starts to consider a new lockdown. It is trading at 1.2850, which is the lowest it has been since Wednesday. The pair has also managed to move below the ascending trendline shown in red. This trendline was part of a bearish flag pattern. Similarly, the Relative Strength Index (RSI) has fallen to the current level of 40. Therefore, the pair is likely to continue falling as bears aim for the next support at 1.2800.
The USD/JPY pair has been in a strong downward trend as traders react to the new Japanese prime minister. The pair is trading at 104.10, which is slightly above the intraday low of 104.00. On the four-hour chart, the price is slightly below the 50-day and 100-day moving averages while the RSI has moved to the oversold level. It is also slightly above the previous support of 104.20. Therefore, even with the day’s decline, the pair is likely to continue falling.