European equities bounce back even as risks emerge

European stocks bounced back today even as serious concerns about the health of the economy remained. In Germany, the DAX index rose by almost 1% while in France and the UK, CAC 40 and FTSE 100 rose by more than 0.5%. In Asia and the US, however, equities remained in the red. In Hong Kong, the Hang Seng fell by more than 1% while in China, the Shanghai Composite fell by 1.3%. In the US, futures tied to the Dow Jones and the S&P 500 fell by more than 0.10%. The recent volatility in equities is mostly due to the rising number of COVID cases in some countries and the rising political differences in the United States. These differences have made it almost impossible for congress to provide stimulus. 

The New Zealand dollar declined against the US dollar as the Reserve Bank of New Zealand (RBNZ) started its monetary policy meeting. The bank will deliver its interest rate decision tomorrow. Analysts polled by Reuters expect that the bank will leave the rate unchanged. Still, most of them expect the bank to provide hints about negative interest rates. The decision will come at a time when the country has made significant strides in its battle against the second wave of the virus. It also comes a few weeks before the country’s next election.

The US dollar index rose today ahead of the testimony by Jerome Powell in congress. The chair is set to answer questions from lawmakers about the policies it has enacted to cushion the economy. He is also expected to provide more information about the bank’s plans for the future if the economy continues to worsen. Still, this testimony is not expected to move the currency since the bank delivered its decision last week. Nonetheless, the existing home sales data and the Richmond Fed manufacturing index could move the currency.

GER30

The DAX index rose to an intraday high of €12,672, which was higher than yesterday’s low of €12,504. The daily chart shows that the index had moved below the ascending white trendline yesterday. At the same time, the 25-day and 10-day exponential moving averages have made a bearish crossover. The price is also slightly above the 23.6% Fibonacci retracement. Therefore, even with the gains today, the index remains in a bearish trend, which means that it could retest yesterday’s lows.

EUR/USD

The EUR/USD pair declined to an intraday low of 1.1720. On the four-hour chart, this price is slightly below yesterday’s low of 1.1736. The price is still below the short and medium-term moving averages. Also, it had moved below the neckline of the head and shoulders pattern. The DeMarker, on the other hand, has moved below the oversold level. Therefore, the pair seems to be under pressure, which could lead to a bearish breakout.

NZD/USD

The NZD/USD pair dropped to an intraday low of 0.6640, which is the lowest it has been since September 14. The 25-day and 14-day EMAs have made a bearish crossover while the signal and histogram of the MACD have moved lower. The pair has also moved below the bearish pennant pattern that happened yesterday. Therefore, the pair is likely to remain under pressure ahead of the RBNZ decision.