US dollar rises, global stocks retreat as Covid jitters remain
Global stocks declined sharply today as traders continued being concerned about the rising number of Covid-19 cases and the likelihood of another recession. In Europe, the DAX index, CAC 40, and FTSE 100 indices fell by more than 2%. The same is true in the United States, where futures tied to the Dow Jones, S&P 500, and Nasdaq 100 fell by more than 1%. In recent weeks, thousands of people have been infected by the virus even as a vaccine remains elusive. In the US, the average number of daily cases has soared to more than 70,000. The country has confirmed more than 500k cases in the past week and experts expect that the cases will continue rising.
The price of crude oil declined by more than 4% as fears of a sustained slowdown continued. As more people get infected, global governments have started adding more travel restrictions. For example, in Norway, the government has said that all visitors will need to quarantine for ten days. This will affect demand at a time when supply is increasing. The price is also falling in reaction to data by the American Petroleum Institute (API) that showed that inventories rose by more than 4 million barrels last week. Later today, the Energy Information Administration EIA) will release official inventories data.
The Canadian dollar declined sharply against the US dollar because of the weak crude oil prices. Traders are also waiting for the interest rate decision by the Bank of Canada. Analysts believe that the bank will leave interest rates unchanged and hint at more quantitative easing. This is because the outlook has changed materially since the last interest rates decision. Some of the rising risks in Canada are the falling housing prices, low inflation, and the rising Covid cases in the country and in its biggest trading partner.
On the hourly chart, we see that the EUR/USD pair declined to a low of 1.1738, which is the lowest it has been since October 19. As it declined, it moved below the important support of 1.1787, which was the neckline of the head and shoulders pattern. The pair’s oscillators, including the relative strength index, have moved below the oversold level. Therefore, any gains from the current price may be limited since bears are in total control.
The USD/CAD pair rose to an intraday high of 1.3245, which is the highest it has been since October 15. On the hourly chart, the price managed to move above the important resistance at 1.3200 and is now aiming at the next resistance of 1.3260. The price is above the double and triple moving averages. The stochastics and RSI have also moved above the overbought level. Therefore, while the pair is likely to continue rising, there is also a possibility of more volatility ahead and after the BOC decision.
The XBR/USD pair dropped to an intraday low of 40, which is the lowest it has been since October 1. On the four-hour chart, the price is along the lower line of the Bollinger bands while the RSI has moved to the oversold level of 30. The pair also moved below the previous support of 40.55. Therefore, as Covid cases rise, the pair is likely to continue falling, as bears aim for the next target at 39.50.